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High hopes in the Alps

Each year world political and business leaders meet at the World Economic Forum in the Swiss resort of Davos. The aim is to assess the progress of the global economy and to look at challenges ahead and what can be done about them.

Cynics claim that the round of presentations, discussions, Champagne receptions and fine dining rarely leads to anything concrete. Those who are less cynical argue that the Forum gives a unique opportunity for considering policy options and helping to shape a global consensus.

This year the mood was more optimistic. Many believe that the worst of the financial crisis is behind us. Stock markets are buoyant; the banking system seems more secure; the eurozone has not collapsed; growth prospects seem a little brighter.

But perhaps ‘optimistic’ is an overstatement. ‘Less pessimistic’ might be a better description. As Christine Lagarde, head of the IMF, pointed out in her speech:

The recovery is still weak, and uncertainty is still high. As the IMF announced just a few hours ago in our World Economic Outlook, we expect global growth of only 3½ percent this year, not much higher than last year. The short-term pressures might have alleviated, but the longer-term pressures are still with us. (Click here for transcript).

In both her speech and her press conference, she went on to outline the policies the IMF feels should be adopted to achieve sustained global growth.

The articles below summarise the outcomes of the Forum and some of the views expressed.

Articles
Too soon for sighs of relief Deutsche Welle, Andreas Becker (27/1/13)
Davos 2013: The icy economic chill begins to thaw The Telegraph, Louise Armitstead (26/1/13)
IMF Projects Modest Pick-up in Economic Growth in 2013 IMF videos, Olivier Blanchard, IMF Chief Economist (23/1/13)
Managing Director’s New Year Press Briefing IMF videos, Christine Lagarde, IMF Managing Director
Mark Carney in Davos: what’s up next for the global economy Maclean’s (Canada), Erica Alini (26/1/13)
World Economic Forum ends on warning note over ‘complacency’ The Guardian, Graeme Wearden (26/1/13)
Angela Merkel tells Davos austerity must continue The Guardian, Graeme Wearden and Larry Elliott (24/1/13)
Davos 2013: A ‘sigh of relief’ at the World Economic Forum BBC News, Stephanie Flanders (27/1/13)
Happy talk The Economist (27/1/13)
Davos Man and his defects The Economist, Schumpeter (26/1/13)
Davos: are the captains of capitalism finally paying attention? The Observer (27/1/13)

Official site
The Global Agenda 2013 The World Economic Forum

IMF projections
Modest Growth Pickup in 2013, Projects IMF IMF Survey Magazine: In the News (23/1/13)
World Economic Outlook Update IMF (23/1/13)

Questions

  1. Why was the mood at the WEF less pessimistic than in 2012?
  2. What threats remain to sustained global recovery?
  3. What policies are being recommended by Christine Lagarde of the IMF? Explain the reasoning behind the recommendations.
  4. What disagreements are there between global leaders on the scope for fiscal and monetary policies to stimulate economic growth?
  5. In her press conference, Christine Lagarde stated that “the teams here have concluded that the fiscal multipliers were higher in the context of that unbelievable international crisis”. Do you agree with this statement? Explain.
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