WEF: World economy is not out of the woods yet


Published — Thursday 24 January 2013

Last update 24 January 2013 3:34 am

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DAVOS: Global markets have calmed significantly in the past year, but the world economy is not out of the woods yet, a panel of top officials and bankers said yesterday as the World Economic Forum opened.
At the first formal session of the five-day gathering of the world's top business and political leaders, deputy head of the International Monetary Fund Min Zhu drew a contrast between today's mood and that of last year's meeting.
"At this particular moment, things are much better than 12 months ago. A year ago here, we were really concerned about the euro crisis, the US fiscal cliff," said Zhu.
"With all the policy actions, much has calmed down now but we've got to be very careful. The tail-risk has been moved off the table but there are issues still there," he added.
Jamie Dimon, chief executive of JP Morgan Chase, said the United States was "in pretty good shape" and added that the euro zone had "stabilized" but warned financial crises would continue until better market regulation was in place.
"If we do everything right, we will get out of this. If we don't, this could last another 10 years," said Dimon, one of the world's top bankers.
This year's World Economic Forum in Davos takes place against a backdrop of less volatility on the financial markets, but a former head of the German central bank, Axel Weber, warned against "kicking the problems down the road."
"I think we are heading into a very dangerous environment," said Weber, now the head of Swiss banking giant UBS.
He said action by the world's central banks to shore up confidence in the markets was nothing but a "short-term fix" and complained that "we are living now at the expense of future generations."
Weber resigned as head of the Bundesbank in protest at the European Central Bank's plan to buy the bonds of struggling euro zone countries and quipped: "My views haven't changed since then."
And Tidjane Thiam, chief executive of Prudential, Britain's biggest insurer, said there was little prospect of preventing a future crisis.
"There are people working out how to prevent having a crisis again. They are wasting their time because there will be a crisis again," said the insurance boss.
The first world leader to address the forum, Russian Prime Minister Dmitry Medvedev, was also in bullish mood, telling the assembled elite that his country grew 3.5 percent last year and aimed for five percent growth annually.
Britain's David Cameron will speak on Thursday, fresh from committing Britain to a referendum on EU membership by the end of 2017 if his party wins another term, which drew dismay from one of Britain's top business executives.
"It's at best neutral and at worst negative. So it can't be positive," said Martin Sorrell, chief executive of advertising giant WPP.
"You just added another reason why people are going to postpone investment decisions and the last thing we need is people postponing more."
Other top speakers are European Central Bank President Mario Draghi, who spoke on "challenges for the years to come", and the head of the International Monetary Fund, Christine Lagarde.
Every year events conspire to hijack the agenda and this year is no different, with the conflict in Mali and the crisis in Syria poised to exercise the minds of the global elite.
Jordan's King Abdallah was due to make a special address and the premiers of Egypt, Lebanon, Libya, Tunisia and the Palestinian Territories were scheduled to attend the forum.
There is also a heavy African presence, with the leaders of South Africa and Nigeria attending a session on "de-risking" the continent yesterday.

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