Don’t relax, Davos forum warns on global crisis

DAVOS, Switzerland - Agence France-Presse

International Monetary Fund (IMF) chief Christine Lagarde attends the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013. REUTERS Photo

The world’s political and business elite headed home from this year’s Davos forum with warnings that while the worst of the financial crisis seems over there is still much to be done.

International Monetary Fund chief Christine Lagarde said in the closing moments of the annual gathering in the snowy Swiss ski resort on Saturday that she recommended the “do not relax principle” for the coming year.

Where for the two previous years a sense of crisis had hung over the World Economic Forum, the mood was sunnier at the 2013 edition as speaker after speaker said they were now cautiously optimistic. “I feel the circumstances in which I’m addressing you today are very different than 12 months ago,” said Italian Prime Minister Mario Monti in his opening speech, following a torrid year dominated by the euro crisis.

European central banker Mario Draghi meanwhile hailed 2012 as the year that the troubled single currency was “relaunched,” even as others were hailing him as the man who had saved the eurozone from catastrophe. The Chinese economy’s slowdown seemed less serious than a year ago to the participants while the step back from the fiscal cliff in the United States also eased minds.

Lagarde: Fragile recovery

But as the 2,500 world leaders, financial officials, tycoons and journalists departed the picture-postcard Alpine resort, they may have felt a chill that was not just down to the subzero temperatures. Lagarde said the IMF’s forecast of a “very fragile and timid recovery for 2013” was based on “eurozone leaders, the US authorities on the other hand and the Japanese authorities making the right decisions.” She added: “And that’s what I mean by ‘do not relax’ because some good policy decisions have been made in various parts of the world. In 2013, they have to keep the momentum.” The head of the Organisation for Economic Cooperation and Development (OECD), Angel Gurria, warned meanwhile that countries had exhausted most room for maneuver in terms of fiscal and monetary policy.
As in previous years the Davos forum was partly hijacked by external events, particularly after British PM David Cameron vowed to hold a referendum on European Union membership by the end of 2017.