EU, US chiefs thrash out crisis at Davos

January 27, 2012
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A World Economic Forum (WEF) logo is seen in front of snow covered trees in Davos.
DAVOS, Switzerland, Jan 27 – The key economic policymakers of Europe and the United States will thrash out the prospects of turning round the financial crisis at Davos on Friday ahead of a key European summit.

The finance ministers of Germany and France along with the head of the European Central Bank will try and launch a defence of the beleaguered single currency area after Britain’s prime minister accused it of “madness”.

US Treasury Secretary Timothy Geithner meanwhile will debate the outlook for his economy after official acknowledgement from the Obama administration that the eurozone was undermining its growth ahead of the November election.

The third day of the elite gathering will also focus on events in the wider Middle East with an address from Hamadi Jebali, the post-revolution Islamist premier of Tunisia, and a debate on Iran’s nuclear ambitions.

The annual forum has been mired in gloom about the state of the global economy — in particular about the eurozone crisis. European leaders are meeting in Brussels on Monday to decide on their latest crisis strategy.

A fortnight after France was stripped of its triple A credit rating, Finance Minister Francois Baroin will join his German counterpart Wolfgang Schaeuble in a debate entitled: “How will the eurozone emerge from the euro crisis?”

After the Friday the 13th downgrade by Standard and Poor’s, Baroin said the development was “not a catastrophe” and insisted that the government rather than the ratings agencies would decide French policy.

But the Davos meeting has reverberated with calls for eurozone nations to act decisively to restore confidence and accusations from Canada’s leader Stephen Harper that they have been guilty of complacency.

British Prime Minister David Cameron did little to mend bridges with the rest of Europe on Thursday by savaging France and Germany’s plans for a new financial transactions tax.

“Even to be considering this at a time when we are struggling to get our economies growing is quite simply madness,” he declared.

The eurozone has caused alarm far beyond the continent and Mexican President Felipe Calderon used his speech late Thursday to urge Europe to “bring out the bazooka immediately” to prevent the problem from sinking Italy and Spain.

“It is necessary to bring out the bazooka immediately, before the gunpowder gets wet,” said Calderon, who holds the rotating chair of G20 world powers.

“Don’t forget that we are in the same boat. It is not just a question of a possible implosion of the euro, but a crisis across the world.”

Geithner’s address comes a day after the Federal Reserve cut its US growth forecast to 2.2-2.7 percent, about one-quarter percentage point below the previous forecasts, citing the eurozone crisis.

“We continue to see headwinds coming from Europe,” Fed chairman Ben Bernanke said in a news conference.

Jebali’s appearance is designed to imbue a rare spirit of optimism but he will speak just as eyes will be turned towards the head of the UN’s atomic watchdog as he discusses the implications of Iran acquiring a nuclear bomb.

International Atomic Energy Agency chief Yukiya Amano will be joined at the debate by Ehud Barak, the defence minister of Iran’s arch foe Israel.

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