DAVOS (Switzerland): 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 (WEF) 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 (IMF) Min Zhu drew a contrast between yesterday'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 United States 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 US was 'in pretty good shape' and added that the eurozone had 'stabilised' but warned financial crises would continue until better market regulation was in place.
Central banks' action
"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 eurozone 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. Over the next four days, around 45 world leaders will rub shoulders with some 2,500 lobbyists, journalists, captains of industry and economists in the picture-postcard Swiss ski resort for the WEF.
And while the 2012 meeting was dominated by the euro crisis and fears Greece could be forced out of the eurozone, this year's gathering appeared to be marked by a feeling the global economy may have turned the corner. In a major survey released by financial services firm PricewaterhouseCoopers, chief executives said they were marginally less gloomy about the global economy.
Among the leaders set to address the forum are German Chancellor Angela Merkel, Russian Prime Minister Dmitry Medvedev and Italian Prime Minister Mario Monti. British Prime Minister David Cameron will speak today, fresh from committing Britain to a referendum on EU membership by the end of 2017 if his party wins another term. Medvedev will be the first major figure to speak, making an address around noon yesterday on Russia's economic outlook.