UBS chairman and top Chinese economist provide dissenting voices amid optimism of many speakers at Davos
By Graeme Wearden in Davos
guardian.co.uk, January 26, 2013
Axel Weber, the USB chairman, said he feared the mood in Davos was ‘too good to be true’. Photograph: Pascal Lauener/Reuters
The World Economic Forum’s annual meeting broke up on Saturday night amid warnings that attendees were too relaxed and optimistic about the state of the global economy.
Delegates left the congress centre in Davos with the words of Axel Weber, chairman of Swiss bank UBS, ringing in their ears. “In my view the mood [at Davos] borders on complacency,” Weber said. “The mood has been good, in brackets too good to be true.”
Many speakers at the four-day meeting at the Swiss ski resort predicted that the worst of the financial crisis was over, as stock markets continued to rally this week. Weber, though, warned that an unexpected event could easily puncture the mood, citing political events such as autumn’s general election in Germany.
“My fear is that 2013 will be a repeat of 2012,” explained Weber in a panel session to debate the global agenda for the next 12 months. He said that last year also began well, with companies posting solid financial results, before markets became gripped by fears that Greece would topple out of the eurozone.
Christine Lagarde, managing director of the International Monetary Fund, was also cautious, describing the recovery as “fragile and timid”.
Influential Chinese economist Li Daokui cited the disagreements in the US over its debts as a key risk to the global economy this year.
“In the eurozone we have had promises of action … In the US, my observation is that we’ve not even had promises,” said Li, a former adviser to the People’s Bank of China’s Monetary Policy Committee. He suggested there was a 30% risk that the investor panic of summer 2011, when stock markets tumbled, would return this year if solid progress was not made in America.
Last Wednesday the US House of Representatives passed legislation suspending the legal limit on government borrowing for four months, which means the issue could dominate most of the first half of 2013.
Weber, the former head of the Bundesbank, also took issue with Mark Carney’s assertion earlier in the day that monetary policy was not “maxed out”.
“I think monetary policy now is too loose”, Weber warned, saying investors were struggling to “price risk” now that central banks have expanded their balance sheets and pumped huge amounts of liquidity into the markets.
Frederico Curado, president of Brazilian aircraft manufacturer Embraer, agreed that businesses are much more confident about economic prospects. “Companies are sitting on probably unprecedented amounts of cash. Hopefully this optimism we are seeing will translate into investments.”
Curado also reminded the Forum that the real economy needs further help, describing unemployment across the world as a “huge, huge issue for everyone.”