At a closing panel on the economic outlook, International Monetary Fund (IMF) Managing Director Christine Lagarde said that the global economy is in a “timid recovery.”
“It is timid because there is still a bit of uncertainty as to what will happen in the euro zone, what the outcome of the discussions between Congress and the president and the administration in the US will be, what will be the consequences of the new Japanese policies that have been announced, and what will pan out in China when the new leaders take over in March,” she explained.
The IMF chief also called on world leaders to be vigilant and active.
“Keep the momentum, it’s not time to relax,” Christine Lagarde said in an interview to a foreign TV channel.
According to Mario Draghi, President of the European Central Bank (ECB), conditions on financial markets have improved considerably, but policy makers are still waiting for signs that the economy has turned for the better.
“The perception we have at the ECB is that the level of economic activity is in the process of stabilizing at a very low level. We foresee a gradual recovery in the second part of the year,” he said.
However, many foreign analysts agreed that the risks in Europe are still high.
The Prime Minister of Great Britain David Cameron who promised to held an in-out referendum on Britain’s membership of the European Union, stated that the UK would oppose all deepening of political ties within the EU.
“Countries in Europe have their histories, their traditions, their institutions, want their own sovereignty, their ability to make their own choices, and to try and shoehorn countries into a centralized political union would be a great mistake for Europe,” he said.
“Britain is a major European player on all of the issues where Europe needs to act – being more competitive, fighting terrorism, combating climate change – we are right out there leading the arguments, making the arguments,” David Cameron added and stressed that it is the sort of political action the UK needs.
However, the Prime Minister assured that Great Britain remains committed to the European Union, seen as an alliance devoted to facilitating business and a functioning single market.
Analyzing the results of the forum, Dr. Nariman Behravesh, Chief Economist of IHS drew attention to the relief that prevailed in Davos.
“The general mood in Davos was one of relief that a number of crises – in particular, the Eurozone crisis, the US fiscal cliff and China hard landing – were avoided in 2012. But there was also concern that the underlying problems, especially in Europe and the US, have not been solved,” he said in an interview with news agency “PenzaNews.”
According to him, the biggest problem identified was inadequate growth in most regions of the world – developed and emerging.
“There was a consensus that more microeconomic reforms, such as deregulation, more competition and trade liberalization, are required to bring about stronger growth in the long-term,” Chief Economist of IHS added.
He also noted that there was optimism about the economic outlook for the US and Asia, especially China.
“Both US and Chinese growth are expected to accelerate by year end growing at roughly a 3% and 8.5% rate, respectively. The Eurozone will continue to contract at a rate of -0.2 this year. Russia can be expected to go at a rate of around 3.5%,” said Nariman Behravesh.
Alan Oxley, one of Australia’s most authoritative advisers on international trade, Chairman of the Australian APEC Study Centre and Chairman of World Growth, also pointed to the mood of relief in Davos.
“The Head of the Swiss based bank UBS warned about the complacency over the debt crisis in Europe. The perspective in the rest of the world is that only two options are realistic in Europe – a huge destruction of wealth, the like of which has not been seen for 70 years, or spreading the burden of the debt workout across the people of Europe, flattening growth for a decade or more. The mood at Davos seems to suggest this is not fully understood,”
He also noted that some business figures and academics at Davos talked about the need for business to adopt social and political objectives. However, according to him, excessive focus on non-economic objectives by both government and business is the root cause of the European debt crisis.
“It is time for big business to concentrate on what their shareholders want – a good return on capital – and leave improvement of the political and social condition to governments,”
In his opinion, emerging markets, in particular in the Asian Pacific region, will for the next decade drive global growth in markets.
“This is recognized by the heads of global consumer goods businesses. The established, mostly US and European-based, global corporations will face competition from locally-based companies in the emerging market economies. If they focus on producing higher-cost “socially-
He also stressed that there is disconnect between thinking in Europe and the rest of the world about the importance of ensuring continuing growth.
“This was clear at the UN Rio Earth Summit in June 2012. Leading European nations and the European Commission pressed for establishment of a global “Green Economy” as the new objective for the UN. The overwhelming majority of the world’s nations rejected that and restated the long-standing consensus in the UN that sustainable development must give equal regard to growth, protection of the environment and the social dimension,” he explained.
“The outcome of Davos forum suggested that the syndrome that has beset Europe for nearly two decades that economic growth is not a leading priority is still shaping thinking there,” Alan Oxley said.
Marta Andreasen, member of European Parliament’s Budget Committee expressed the view that the European Union’s stature in proceedings was diminished.
“The Buzz words at Davos seemed to be resilience, growth and flexibility;
“As a eurosceptic, my position is viewed by Brussels as biased and overtly political. Yet many facts have emerged from Davos that make my views incontrovertible,”
According to her, the Euro has abjectly failed to deliver its stated aim of making the EU “the most dynamic knowledge based economy in the world by 2010” as envisaged under the Lisbon Treaty.
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