January 28, 2013

Fragile economy, other global woes dominate at Davos

A 'risk of relapse' remains, warns IMF chief Christine Lagarde, even with positive signs on the economic front, at least in emerging markets.

By EDITH M. LEDERER/The Associated Press

DAVOS, Switzerland — The fragile state of the world economy, coupled with the relentless turmoil in Syria and the rocky fallout from the Arab Spring, dominated discussions during this year's annual gathering of the global elite at Davos, leaving many participants uneasy about what lies ahead as they left for home Sunday.

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Participants listen to a panel session on the last day of the meeting of the World Economic Forum in Davos, Switzerland, on Saturday. The annual gathering of the global elite focused this year on how to promote economic growth and jobs, especially for the youth among the world's 220 million jobless.

The Associated Press

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Even broad agreement that there are some positive signs on the economic front, at least in emerging markets, was coupled with a warning from the head of the International Monetary Fund. "Do not relax," Christine Lagarde said. There's still a "risk of relapse."

More than 2,500 of the best and brightest in business, government, academia and civic life gathered for the five-day World Economic Forum at this Alpine resort. But much of the overt glitz and glamor that is a usual feature was toned down or absent this year, a decision that founder Klaus Schwab said reflected the serious issues facing the world.

Political and economic issues vie for top billing each year at Davos, and this time, the economy had the edge, with a special focus on how to promote economic growth and jobs, especially for the youth among the world's 220 million jobless.

The IMF said that China, Africa and other emerging markets could see significant growth, but Japan, eurozone nations and the U.S. are likely to struggle with negative to low growth. Ahead of the 43rd forum, the IMF downgraded its forecast for global economic growth this year by one-tenth of a percentage point to 3.5 percent.

While the U.S. avoided the so-called "fiscal cliff" of automatic tax increases and spending cuts, and fears have abated that the euro currency union will break up, there is growing concern that governments may ease up on measures to improve growth and reduce debt that the IMF and many other institutions are calling for.

IMF chief Lagarde said the "very fragile and timid recovery" depends on leaders in the 17-nation eurozone, the United States and Japan making "the right decisions." The eurozone in particular "is fragile because it is prone to political crisis" and slow decision-making, she said.

Davos participants' uneasiness about the world economy was matched by growing concern over the political turmoil in the Arab world, terrorism in North Africa, a spate of natural disasters that have highlighted the failure to tackle climate change, and the growing inequality between the world's "haves" and "have-nots."

"Two years ago, gloom around the stalled economic recovery was leavened by euphoria at the outbreak of the Arab spring," Kenneth Roth, the executive director of  Human Rights Watch, told The Associated Press at Saturday night's low-key final reception. "This year, relief at the improved economic outlook is tempered by despair at the unimpeded slaughter in Syria, uncertainty about the outlook in Egypt, and frustration over the Arab monarchies' resistance to reform."

The Arab Spring uprisings have ousted dictators in Tunisia, Yemen, Libya and Egypt over the past two years. But now Islamists and liberals are wrangling over power, with Islamists mainly gaining the upper hand. Democracy is far from certain, and economic woes have left hundreds of thousands of young people jobless and frustrated that their "revolutions" haven't produced any dividends.

Former Arab League Secretary-General Amr Moussa, a losing candidate in Egypt's presidential election last year, said there have been achievements, but warned that democracy isn't only about casting a vote.

"It is the respect of human rights, for rights of women, separation of powers, independence of the judiciary. This meaning of democracy we have not yet achieved," Moussa said.

Elsewhere in the Middle East, Israeli-Palestinian peace talks remain stalled, Arab monarchs remain entrenched, and the death toll from the escalating civil war in Syria has topped 60,000 with no end in sight.

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