Euro, rich-poor gap proved key issues at Davos

By Edith M. Lederer

Associated Press

Published: Sunday, Jan. 29 2012 10:00 a.m. MST

The mountain resort of Davos pictured during the last day of the 42nd Annual Meeting of the World Economic Forum, WEF, in Davos, Switzerland, Sunday, Jan. 29, 2012. The overarching theme of the Meeting, that took place from Jan. 25 to Jan. 29 was "The Great Transformation: Shaping New Models".

Laurent Gillieron, AP Photo/Keystone

DAVOS, Switzerland — Europe's crippling debt crisis dominated the world's foremost gathering of business and political leaders, but for the first time the growing inequality between the planet's haves and have-nots became an issue, thanks largely to the Arab Spring uprisings, the Occupy movement and other protests around the globe.

The mood at the end of the five-day meeting in Davos was somber, and more than 2,500 VIPs headed home Sunday concerned about what lies ahead in 2012. Plenty of champagne flowed in this alpine ski resort — but the atmosphere was flat and the bubbling enthusiasm of some past World Economic Forums was noticeably absent.

Despite some guarded optimism about Europe's latest attempts to stem the eurozone crisis, fears remain that turmoil could return and spill over to the rest of the world. And there were no answers to the widening inequality gap, but a mounting realization that economic growth must include the poor, that job creation is critical, and that affordable food, housing, health care and education need to part of any solution.

Just before the forum began, the International Monetary Fund reduced its forecast for global growth in 2012 to 3.3 percent from the 4 percent pace it projected in September. Many other economic forecasters also predict a slowing economy, including New York University's Nouriel Roubini, who is widely acknowledged to have predicted the crash of 2008 and who said he might be "even slightly more bearish" on the new IMF forecast.

Asia is expected to remain the engine for global growth though at a slower rate, with China leading the way at more than 8 percent, followed by India and Indonesia.

IMF Managing Director Christine Lagarde warned that the eurozone crisis is not the region's problem alone.

"It's a crisis that could have collateral effects, spillover effects, around the world," she said. "What I have seen, and what the IMF has seen in numbers and forecasts, is that no country is immune and everybody has an interest in making sure that this crisis is resolved adequately."

The IMF is the world's traditional lender-of-last-resort and Lagarde is trying to increase its resources by $500 billion so it can help if more lending is needed in Europe or elsewhere. European countries have said they're prepared to give the IMF $150 billion, but that means the rest of the world will have to come up with $350 billion.

At a closing panel Sunday, Paul Polman, CEO of Unilever, said a readjustment in Europe is essential "because, if you want to really simplify it, we've lived above our means, and we've done that for too long, and the moment of truth has arrived."

Vikran Pandit, CEO of the global bank Citi, said the euro crisis "is costing us about 1 percent in GDP around the world. You do the math. You do the math and say: 'How many jobs is that? How many people are not working because of that? What can we do to go after the biggest question we've got for this decade which is jobs?'"

The world needs 400 million new jobs between now and the end of the decade, not counting the 200 million needed just to get back to full employment, so "that should be our number one priority," he said.

To keep the spotlight on jobs and poverty at the forum, the Occupy movement that began on Wall Street and spread to dozens of cities around the world set up a protest camp in igloos in Davos. They demonstrated in front of City Hall.

In a separate protest, three Ukrainian women were arrested when they stripped off their tops — despite temperatures around freezing — and tried to climb a fence surrounding the invitation-only gathering holding banners saying: "Poor, because of you" and "Gangsters party in Davos."

Citi's Pandit said to create the conditions for growth, economic uncertainty must end and that means quickly resolving the eurozone crisis, ending regulatory uncertainty, and getting the public and private sector together to build infrastructure that can create jobs.

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