The World Economic Forum: What was its outcome?

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The Word Economic Forum in Davos, Switzerland, is an annual meeting of entrepreneurs, major politicians, intellectualists and journalists from all over the world. The summit, which took place from 26th to 29th January, constituted an important challenge for the Eurozone.

Davos: The European Union pinned down

Author

Constance Marécheau

02/19/2012 - 20:05

The World Economic Forum in Davos ended on 29th January 2012. Even though the member states of the Eurozone were pinning many important hopes on it and were hoping to reassure their world partners, the outcome of the summit turned out to be rather disappointing for the European Union.

The 42nd World Economic Forum in Davos, which took place from 26th to 29th January, brought together important politicians and businessmen from all over the world. The summit, considerably marked by the current financial crisis, generated important expectations, especially regarding the financial management of the Eurozone in these economically difficult times. However, most of these expectations were not met. Due to demands for guarantees from the rest of the world, the Eurozone is now more than ever the centre of attention. Furthermore, the weakness of the announced measures simply highlighted the antagonism among the European countries, turning the WEF to a failure.

The European Union pinned down

During the 5 days of the conference, the world concern about the fragility of the economic situation in the Eurozone became apparent. Emerging countries in particular wanted to be assured about the strength of the European Union and its ability to mobilise resources in order to help struggling member states, such as Greece. Indeed, the emerging countries are currently suffering the most from the repercussions of the crisis in the Eurozone due to an important decline in their exports to European countries.

Thus, a kind of ultimatum was given to European countries, particularly by the Japanese minister of finances. He warned that without firm action on the part of the European Union, the willingness of emerging countries to finance the IMF would be doubtful. Donald Tsang, the Chief Executive of Hong Kong, declared himself to be more worried than ever about the situation of the Eurozone. In other words, it is necessary that the major European countries show the "colour of their money".

However, German Chancellor Angela Merkel categorically refused to increase German participation in the European emergency fund, which was recently established in accordance with the suggestions of Christine Lagarde (IMF Director) and Timothy Geithner (U.S. Treasury Secretary). This uncertainty about the future of the Eurozone is also growing among entrepreneurs. Some of them are already worried about a possible dissolution of the Eurozone or even a collapse of Euro itself. Others estimate that Europe is no longer worth their investments. And when it comes to European business leaders, they complain about the "negative image" of the European Union outside of its borders. The confidence in European countries seems to be on an extremely low level.

Divisions within the euro area are revealed

Even if EU leaders present at the WEF -- such as Angela Merkel -- tried to be reassuring, some divergences between European countries emerged in Davos, which did not help improve the image of the Eurozone. First of all, different countries seemed to have difficulties in agreeing upon a strategy to save Greece from its insolvency problems. The second stumbling block was the recently-established European Emergency Fund. For instance, David Cameron stated a need to increase the participation of member states, whereas the German Chancellor is against any augmentation of the German contribution.

Finally, the structural reforms promised by Angela Merkel in her opening speech will certainly be insufficient to solve the debt crisis in European countries. In reality, installing a real "firewall" and establishing a budgetary pact will require many negotiations, which will be resumed at the Brussels summit on 31st January.

In conclusion, this forum has done more to highlight the flaws of the Eurozone than to reassure the world. European leaders demand trust, while non-Europeans politicians and entrepreneurs require collaterals. Even though the worries of non-European leaders, particularly the ones from emerging countries, are probably exaggerated, their reaction is certainly disturbing. The countries of the Eurozone must quickly prove their worth.

This article deliberately presents only one of the many existing points of views of this contorversial subject. Its content is not necessarily representative of its author's personal opinion. Please have a look at Duel Amical's philosophy.

This article convinced me.

The Swiss air invigorates the Union

Author

Hélène Legay

02/19/2012 - 20:05

“There is a common feeling that Europe confronted the crisis in a lamentable way,” said Klaus Schwab, the founder of the WEF in Davos. “After having heard from you, I feel reassured.” In spite of the prevailing skepticism, the European Union managed to achieve its main aim which was to restore confidence. The WEF will allow the Union to reassure the markets and start a new chapter after two years of crisis.

There is a common feeling that Europe confronted the crisis in a lamentable way,” said Klaus Schwab, the founder of the WEF in Davos. “After having heard from you, I feel reassured.” In spite of the prevailing scepticism, Europe managed to prove its ability to react and recover. Opened by Angela Merkel on 27th January in Davos, in the heart of the Swiss mountains, and closed Sunday the 29th, the 42nd meeting of the WEF will enable the Union to reassure the markets and start a new chapter after two years of crisis.

A review of European achievement

For the EU, the World Economic Forum in Davos was a perfect opportunity to restore confidence of markets and investors. The forum has been held annually since 1971, bringing together business leaders and major politicians from all over the world, as well as intellectuals and journalists. It addresses the urgent problems of the world concerning issues such as the economy and the environment. The EU delegation was composed of the German, French and Spanish Ministers of Finance, together with the European Commissioner for Economic Affairs, Olli Rehn, and Mario Draghi, the President of the European Central Bank. In front of investors and employers, they presented the great efforts and progress made by the EU in order to end the Euro crisis.

“If we compare the situation today with the one from five months ago, the Eurozone is a whole different world," claimed Mr Draghi, “Many positive changes have taken place on the markets. The banks have more capital and less debt, and appear somewhat immunised against perverse incentives that were characteristic of the financial crisis,” he added. Aware of efforts that remain to be made, the EU delegation declared with one voice that the solution to the current crisis lay in more credible economic policies. Before Mr. Draghi spoke, Wolfgang Schäuble, the German finance minister, stressed the "positive development of the markets "and assured listeners that the EU was keeping the pressure on Greece. The French and Spanish ministers claimed that “it's all about righting the ship” by means of a budgetary pact. That would solidify the management of the budget, as well as the establishment of a "firewall" that the U.S. Treasury Secretary Timothy Geithner wants to be "more muscular, more credible," in order to avoid contagion. With the announcement of these various measures, the EU sought to use the WEF to mark a new beginning.

A Convincing and reassuring Union, led by the German chancellor

During the opening session, Angela Merkel responded to the criticisms of businessmen regarding the inefficiency of the European reaction to the crisis. In a solid speech defending Europe, Merkel ensured that much remained to be done and that "Europe has not yet learned enough from the crisis”. She stressed the necessity of rethinking the current management of the EU, which would require strengthening the Commission in order to let it act like a "real government”. This speech showed the ability of the EU and its Member States to self-examine. Merkel even planned establishing partnerships between countries facilitating movement of workers within the EU. "In twenty years, my dream for Europe would be that young people can go to work wherever they want, without obstacles." she claimed enthusiastically.

On 30th January, all the 27 EU member states met again to discuss the problems of declining of employment and growth. Angela Merkel successfully insisted on creating a treaty constitutionally limiting the deficit in each country. However, despite the EU’s massive campaign to reassure the markets at the WEF, it is hard to ignore the offensive of the UK Prime Minister David Cameron against the Euro and the diplomacy of Paris and Berlin the day after the speech of the German Chancellor. Those contradictory actions made the WEF a window into European dissent-ions.