Just two hours before he spoke at the World Economic Forum in Davos, the Alpine winter calm was briefly disrupted by a small explosion at a hotel — unusual for this Swiss resort, blanketed in security during the annual forum. Windows were broken but there were no injuries, Swiss police said.
Persistent jitters about the euro fueled debates at the forum Thursday, underpinned by the question: Can Europe dig out of its debt hole and get growing again to compete with emerging economies such as China’s? Sarkozy said the continent’s hopes lie in the common currency, shared by 17 countries.
“The disappearance of the euro would be so cataclysmic that we can’t even possibly entertain the idea,” Sarkozy said.
He acknowledged months of worries about the 17-nation euro’s survival since the European Union and International Monetary Fund had to bail out debt-laden Greece and then Ireland last year.
But despite those concerns, he said, “the euro is still there.” “Europe has had 60 years of peace and therefore we will never let the euro go or be destroyed. ... I speak as much for my German friends as I do for the French,” he said.
Sarkozy’s comments helped support the already-buoyant euro. Following his remarks, Europe’s single currency has run up to a fresh two-month high of $1.3759. The euro has advanced nearly 10 cents in a little over two weeks amid mounting signs that EU policymakers have honed their crisis management skills and support for the currency from China and Japan.
ECB chief Jean-Claude Trichet, apparently trying to smooth concerns about above-target inflation, praised the euro’s long-term prospects at another Davos session.
“The euro delivered what had been asked from it, namely price stability,” he said.
Increasingly, the talk among European leaders is of closer economic union — instead of just monetary union. Trichet said he is pushing for bolder moves from EU leaders.
“There is no time for complacency,” he said.
JP Morgan Chase & Co. chief executive James Dimon said governments were right to act by rescuing Ireland and Greece from default rather than risk a run on the continent’s banks.
Europe “did the only good choice, which is to get through this crisis, because if you don’t fix it here, you’re going to fix it there, which is in the banking system,” he said.
Bankers — who came under fire at Davos the last two years amid global financial crisis — seem to be asserting themselves more at this year’s forum. No longer are they on the defensive about taking government bailouts or resisting new regulations, or keeping a low profile.
Not only are participants frantically trying to make up for failing last year to predict Europe’s sovereign debt crisis by holding back-to-back panels on the common currency and the future of the European project as a whole.
They’re also feeling the currency shock in their pockets, as hotels, restaurants and bars in the Swiss ski resort of Davos do business in francs, whose value has surged against the euro in recent months.
Sarkozy said that global currency imbalances — notably China’s low-valued currency and the dominance of the US
dollar in world trade — “one of these days will bring down the whole pack of cards unless we attend to this very swiftly and very strongly.” Currency imbalances and rising commodity prices are key priorities as Sarkozy presides over the Group of 20 leading world economies this year.
Swedish investor Jacob Wallenberg warned that Europe needs to act faster to stay competitive.
“We all see countries such as China, India, rapidly becoming much more competitive,” he said. “It’s not a matter of they’re going to bypass us. They’re going to run us over.” Greek Prime Minister George Papandreou — whose country’s debt crisis sent the euro into its downward spiral last year — questioned whether Europe needs to loosen its social welfare systems to stay afloat.
Saying that emerging economies often have low wages, no unions, little or no pensions or health care, he asked, “The question for Europe is, do we emulate that model?”
Elsewhere at Davos on Thursday:
— A panel on climate change hosted by The Associated Press brings together UN climate negotiator Christiana Figueres, Mexico’s President Felipe Calderon and South Africa’s President Jacob Zuma, whose country will host the next climate conference this year after last year’s successful summit in Cancun.
— The head of the World Trade Organization, Pascal Lamy, said he hopes key commerce ministers meeting in Switzerland this week will commit to accelerating talks on a new global trade deal.
— Exxon Mobil Corp. signed a deal with Russia’s biggest oil company, Rosneft, to develop oil and gas resources in the Black Sea, a new boost for the country’s lucrative energy sector despite concerns about the challenges of investing there.
The Davos hotel explosion occurred in a storage room of the Posthotel Morosani, just over 2 kilometers from the main venue of the forum.
Forum organizers said a firework was to blame. But an anonymous posting on the website indymedia.ch claimed responsibility for the attack, saying it was directed at Swiss government officials and senior executives of Swiss bank UBS staying at the hotel. Its authenticity couldn’t immediately be confirmed.
Left-wing groups plan to hold an anti-capitalist protest this weekend against the annual meeting.
