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Fragile economy, other global woes dominated Davos

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Participants listen a panel session in the Congress Hall the last day of the 43rd Annual Meeting of the World Economic Forum, WEF, in Davos, Switzerland, Saturday, Jan. 26, 2013. AP/Keystone/Laurent Gillieron

DAVOS, Switzerland – The fragile state of the world economy, coupled with the relentless turmoil in Syria and the rocky fallout from the Arab Spring, dominated discussions during this year’s annual gathering of the global elite at Davos, leaving many participants uneasy about what lies ahead as they left for home Sunday.

Even broad agreement that there are some positive signs on the economic front, at least in emerging markets, was coupled with a warning from the head of the International Monetary Fund. “Do not relax,” Christine Lagarde said. There’s still a “risk of relapse.”

More than 2,500 of the best and brightest in business, government, academia and civic life gathered for the five-day World Economic Forum at this Alpine resort. But much of the overt glitz and glamor that is a usual feature was toned down or absent this year, a decision founder Klaus Schwab said reflected the serious issues facing the world.

Political and economic issues vie for top billing each year at Davos, and this time, the economy had the edge, with a special focus on how to promote economic growth and jobs, especially for the youth among the world’s 220 million jobless.

The IMF said that China, Africa, and other emerging markets could see significant growth, but Japan, eurozone nations and the U.S. are likely to struggle with negative to low growth. Ahead of the 43rd forum, the IMF downgraded its forecast for global economic growth this year by one-tenth of a percentage point to 3.5 percent.

While the U.S. avoided the so-called “fiscal cliff” of automatic tax increases and spending cuts, and fears have abated that the euro currency union will break up, there is growing concern that governments may ease up on measures to improve growth and reduce debt that the IMF and many other institutions are calling for.

IMF chief Lagarde said the “very fragile and timid recovery” depends on leaders in the 17-nation eurozone, the United States and Japan making “the right decisions.” The eurozone in particular “is fragile because it is prone to political crisis” and slow decision-making, she said.

Davos participants’ uneasiness about the world economy was matched by growing concern over the political turmoil in the Arab world, terrorism in North Africa, a spate of natural disasters that have highlighted the failure to tackle climate change, and the growing inequality between the world’s “haves” and “have nots.”

“Two years ago, gloom around the stalled economic recovery was leavened by euphoria at the outbreak of the Arab spring,” Kenneth Roth, the executive director of Human Rights Watch, told The Associated Press at Saturday night’s low-key final reception. “This year, relief at the improved economic outlook is tempered by despair at the unimpeded slaughter in Syria, uncertainty about the outlook in Egypt, and frustration over the Arab monarchies’ resistance to reform.”

The Arab Spring uprisings have ousted dictators in Tunisia, Yemen, Libya and Egypt over the past two years. But now Islamists and liberals are wrangling over power, with Islamists mainly gaining the upper hand. Democracy is far from certain, and economic woes have left hundreds of thousands of young people jobless and frustrated that their “revolutions” haven’t produced any dividends.
Former Arab League Secretary-General Amr Moussa, a losing candidate in Egypt’s presidential election last year, said there have been achievements, but warned that democracy isn’t only about casting a vote.

“It is the respect of human rights, for rights of women, separation of powers, independence of the judiciary. This meaning of democracy we have not yet achieved,” Moussa said.

Elsewhere in the Middle East, Israeli-Palestinian peace talks remain stalled, Arab monarchs remain entrenched, and the death toll from the escalating civil war in Syria has topped 60,000 with no end in sight.

Jordan’s King Abdullah II, whose country is hosting almost 300,000 Syrian refugees, predicted that Syrian President Bashar Assad’s regime will last at least another six months. He called for a transition plan involving all Syrians and the Syrian army.

He also urged stepped up international support to end the Syrian crisis, saying, “The weakest refugees are struggling now just to survive this year’s harsh winter.”

Abdullah told the forum that “unprecedented threats to regional and global stability and security” need international action now, not the “wait and see” response by some countries — which he did not identify — especially in helping governments emerge politically and financially from the Arab uprisings.

The king, considered one of the region’s moderate leaders, also warned Israel to stop playing the “waiting game,” and said President Barack Obama’s second term offered the last opportunity to create two states — Palestine and Israel — that can live side-by-side in peace.

Angel Gurria, secretary-general of the Paris-based Organization for Economic Cooperation and Development, said the focus on resolving the world’s economic crisis has distracted leaders from many other important issues, including education, the social consequences of unemployment and promoting ways to deal with climate change.

Nonetheless, Gurria said, the world should be “very worried” because there aren’t many “tools” left to fix the economy if things get worse.

Trevor Manuel, South Africa’s National Planning Commission minister, told AP that the key message from Davos for him was a positive one — that “many of the decisions that have been taken bring us closer to where we need to be.” He warned that “a sense of an all-pervasive gloom … frequently becomes a self-fulfilling prophecy.”


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Tags: Christine Lagarde , Davos , Economy , IMF , World Economic Forum




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