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By Esther Bintliff in London, with contributions from FT writers and editors in Davos.
All times GMT.
18.30: That’s all from us for now folks! But you can stay up to date with all the FT’s coverage of the World Economic Forum 2012 at www.ft.com/davos. For now, we’ll leave you with a quick recap of some of today’s top news and views:
- Christine Lagarde, head of the IMF, put it bluntly when she got out her handbag and told a WEF panel: “I’m here with my little bag to collect a bit of money” (see the 11.23 post)
- At a global economy session, Chris Giles reported that the debate was “more sober than the general mood in Davos of increasing optimism”, with Donald Tsang, chief executive of Hong Kong, saying: “I have never been as scared as now” (see 11.45)
- Yingluck Shinawatra, Thailand’s first female PM, was studiously vague when asked by Gideon Rachman whether and when her brother Thaksin would be allowed to return to Thailand (see 12.30)
- In his round-up on Davos 2012, Martin Wolf noted that Mario Draghi has emerged as the hero of the hour (see 13.15), a point confirmed by Lionel Barber, the FT’s editor, in his video interview (15.20)
- John Gapper reports on what happened when Occupy World Economic Forum demonstrators took over a debate last night (see 16.40)
- “Doha is dead. Long live the multilateral trading system” – Chris Giles on the message the World Trade Organisation wanted to send from Davos on Saturday (see 17.30)
18.10: Jasmine Whitbread, chief executive of Save the Children and one of our guest bloggers, has sent through her three take-aways from the WEF 2012:
So, inequality really did register as a mainstream concern at Davos. Gerard Lyons, Chief Economist at Standard Chartered Bank, flagged it as a major concern that business leaders needed to engage with – noting that while it featured heavily in Taiwan’s recent elections, it will cause considerably more tension in economies that are shrinking not growing. And this was echoed in a number of private functions and conversations. Even the BBC reported it.
As for multi-sector collaboration to tackle the big issues, these are positively mushrooming! The issue here is quality not quantity, so it was a relief to participate in a very practical initiative to develop a “how-to” guide for companies wanting to get behind the health MDGs (Millennium Development Goals). This shares some of the key Dos and Don’ts based on the experience of companies such as Johnson & Johnson working with the Norwegian Government and the consortium of agencies behind the Partnership on Maternal, Newborn and Child Health. And it was great to be part of Unilever’s announcement of their new partnership with 5 specialist agencies to improve the lives of a billion people.
I’m leaving Davos determined to continue build on both trends. But also to look harder at the role of young people as agents of change – this is something I’ve known for years at Save the Children but it’s very energising to see their potential beginning to have an impact at Davos.
18.00: This video, produced in Davos by the FT’s Veronica Kan-Dapaah and Seb Morton-Clark, explores the diverging fortunes of emerging markets and the developed world via a series of interviews with business leaders from the Bric countries:
17.50: Dow Jones is reporting that the Greek government has issued a statement in response to the news last night (as broken by the FT’s Peter Spiegel) that Germany wants the eurozone to take control of the Greek budget:
Greek government spokesman declares that the budget is solely its responsibility – DJ
Nick Malkoutzis, deputy editor of the Greek English language newspaper Kathimerini, confirms:
17.30: One of the most significant Davos sessions this afternoon was a debate on the future of global trade. Chris Giles, the FT’s economics editor, reports back:
Doha is dead. Long live the multilateral trading system. That was the message the World Trade Organisation sought to send at the traditional late Saturday session on the global trading system.
In times past this session has often been notable for the hostility on display between trade ministers, as they repeated private arguments in public.
Now the mood is more weary. Pascal Lamy, the head of the World Trade Organisation, declared the Doha trade round as good as dead as he pointed out that both the US and Indian trade ministers’ arguments were convincing, but they were utterly incompatible without a spirit of compromise.
In a plea for a continuation of the multilateral trading system, in which each country agrees to apply the same trading terms (tariffs, quotas, non tariff barriers etc) to all of its trading partners, Mr Lamy said: “There are things that can be done, but the big prize (a Doha agreement) is not possible.”
“If we leave aside the big battle, the big prize for the moment, then there are areas where multilateral progress can be made,” he added. “But please do not expect trumpets or drums.”
Even this hope seems faint. At the World Economic Forum, countries such as Britain have called for a move towards bilateral trade deals.
Ron Kirk, the US trade representative, explained that the US was also following this route, “because that is where the money is,” and bilateral deals are possible to sell to sceptical US public opinion.
A question from the audience also pointed to a second problem. While many of those on the panel criticised bilateral deals on the grounds that supply chains are global, Daniel Gros, the director of the Centre for European Policy Studies, asked: if this is so, is there so much wrong with our current trading rules?
It was a good question and one without a particularly satisfactory answer.
17.10: The eurozone crisis is “definitely” having an impact on India, says G P Hinduja, co-chairman of Hinduja Group, but he’s nevertheless optimistic about the global outlook in this video interview from Davos with FT banking editor Patrick Jenkins:
16.50: Speaking at Davos yesterday, the EU’s economic chief Olli Rehn said he expected talks on the restructuring of Greek debt to be concluded by the end of this weekend. But a statement released today by the IIF (the Institute of International Finance, which represents many private sector holders of Greek bonds) suggests discussions on the precise details could drag on into next week:
Mr. Charles Dallara and Mr. Jean Lemierre, Steering Committee Co-Chairmen of the Private Creditor-Investor Committee for Greece, stated: “We continued discussions today with Greek Prime Minister Lucas Papademos and Deputy Prime Minister and Finance Minister Evangelos Venizelos over the elements of a voluntary debt exchange.
Further progress was made, building on the understandings reached yesterday on the key legal and technical issues. We are close to the finalization of a voluntary PSI within the framework expressed publicly earlier this week by Luxembourg Prime Minister Jean-Claude Juncker in his capacity as Chairman of the Eurogroup. We expect to conclude next week as discussions on other issues move forward.”
16.40: Martin Wolf asked earlier where the protesters have gone “now there’s really something to protest about” (see 13.15 update). Well, John Gapper, our chief business commentator, spotted a few last night:
There was some excitement in Davos last night as Occupy World Economic Forum demonstrators took over a debate at the Open Forum – a parallel event at Davos which is open to the general public.
Ed Miliband, the Labour Party leader, and Stephen Roach, the non-executive chairman of Morgan Stanley in Asia, were among the panellists debating how to remodel capitalism when they were interrupted by about 30 demonstrators who had spread themselves through the audience of 300.
The Occupy demonstrators wanted the panel members to come down from the stage at the Swiss Alpine High School and sit with the audience, but were instead offered a compromise. One of them was invited to come and sit on stage with the rest of the panellists and take part.
But the mainly Swiss audience then turned hostile to the demonstrators for disrupting the event, with one teenager saying that she was disappointed by their obstructionism.
Larry Elliott, the Guardian journalist moderating the event, called for a vote on whether to proceed with the original debate or run it as the Occupiers wished, and the vote went heavily against the demonstrators.
16.10: Barbara Stocking, chief executive of Oxfam and one of our guest bloggers, has sent through her final thoughts on Davos 2012:
As we’re coming to the end of Davos I’m feeling energised about the year ahead. I’ve engaged in a discussion about this year’s G20 and there is a sense of confidence in Mexico holding the summit. Partly because they did so well with the climate change talks in Cancun, but also for me one of the good things is that Mexico is not just engaging business but the NGO community too.
I also took part in the Mexico B20 taskforce on food security, which was in remarkable agreement about what business and civil society would like the G20 to deliver. This included delivering on the food security item from Cannes last year, but we also started to discuss getting rid of mandates and subsidies for biofuels, and it felt like there was a willingness to look at land titles and the massive land acquisitions taking place today. I hope that leaders of the G20 will be picking up these messages given that food security is one of the major items for this year.
Although it’s an exhausting few days, I’ve realised once again why I come to Davos. I visited Ethiopia in August and Haiti in January but was unable to see either country’s leaders as day-to-day schedules and commitments got in the way. But amid the snow of Davos I was delighted to be able to meet them both.
15.40: Is the global financial system becoming more national? Peter Thal Larsen of Reuters believes it is, and explains why – and the risks associated with such a move – here:
Three years after Western taxpayers were forced into a mass bailout of banks, Western lenders are in full retreat, encouraged by regulators and governments.
…The crisis made it clear that nationality does matter, because domestic taxpayers ended up supporting banks, including their far-flung operations. The crisis also showed that banks had too much leverage.
European banks are now leading a backwards charge.
15.20: The FT video team has interviewed editor Lionel Barber about his experience of Davos and the key themes under discussion at the forum:
14.50: Patrick Jenkins, the FT’s banking editor, is back in the green and pleasant land that is England, having spotted a fellow traveller at Heathrow:
It may have been the early start from Davos (to make the midday Swiss flight from Zurich means getting up at 6am). Or it may have been the ear-bashing on the state of the economy that he got from a fellow passenger in the plane.
Either way, Ed Miliband showed signs of weariness when he passed through Heathrow’s terminal one on his way home from the World Economic Forum in the Swiss ski resort.
At least you’d hope it was tiredness. Otherwise, when he strode confidently through the EU arrivals section of the customs desk, there would be reason to worry about his grasp of European affairs at this critical time of crisis.
14.30: They get up to all sorts at Davos. At a dinner party last night, a rather unusual parlour game was played, reports Martin Wolf, our chief economics commentator. (NB: To be honest, I can’t see this one taking off massively outside the circles of the World Economic Forum, but who knows – it yielded an interesting insight).
Yesterday evening I attended a private dinner attended by a number of very well-informed people.
We were asked by a participant the following question: if someone solvent offered a contract that would pay out a dollar in five years if the eurozone broke up, what do you believe the market would pay for it today and what would you yourself pay for it?
Break-up was defined as the departure of countries with, in aggregate, at least 10 per cent of eurozone GDP (so more than just the current three small IMF programme countries).
The average of responses was 26 cents for the market price and 27 cents for the true value. In other words, the average view of participants was that the market would price the risk of such a break up at about one in four – and, on balance, they agreed with what they thought the market would think.
Of course, there was a wide range of estimates for both variables, from zero to 100 per cent probabilities. The averages were probably affected by a small number of ultra-pessimists. The total number of participants was also just a little over 20.
Nevertheless, this suggests how little credibility the eurozone now has in well-informed circles. This is surely the result of initial flaws exacerbated by bad policy-making over the past few years.
14.25: Japan’s prime minister, Yoshihiko Noda, said he sees Europe’s sovereign debt crisis as the main risk on the horizon. Taking part in a panel at Davos via videolink from Tokyo, Noda said that Japan is working with South Korea and India to reduce the risk of the crisis spreading to Asia. “Japan stands ready to support the Eurozone as much as possible,” he said.
14.00: Tom Friedman, the New York Times foreign affairs columnist, said in a Davos panel today that the full geopolitical repercussions of the Arab Spring have not yet been realised. In this FT video, Gideon Rachman agrees, arguing the implications will be revealed in a “decades-long process”:
13.15: Martin Wolf, the FT’s chief economics commentator, has sent over his take-away thoughts on this year’s Davos.
I have been reminded of two good things about Davos.
- This is the only place where the world’s top business people have to suffer often long queues to enter buildings and leave their coats and pick them up again. And they cannot push through the queue, because the person in front of them is quite likely to be even more important than they are or, worse, a customer or business partner.
- Davos during the WEF is also one of the few places where walking is generally faster than limousine.
For me the most valuable sessions were, as always, outside my area of expertise.
A particularly interesting one was about how climate change is transforming the Arctic. Among other things, the Arctic Ocean is increasingly navigable in summer, while the ice roads used in winter exist for shorter periods and may also be more unstable. The session leader suggested that the conflict over resources among the arctic states -Canada, Greenland (that is, Denmark), Norway, Russia and the US – will be managed successfully, in accordance with the principles of the UN Convention on the Law of the Sea, even though the US has not ratified it.
Again, a session on digital fabrication indicated the possibilities for rapid development of personal manufacturing. This reminded me that the one group of western business people who are very optimistic at the moment (too optimistic?) is the technology entrepreneurs.
Last but not least, Mario Draghi is the hero of the hour. Doesn’t everybody love huge supplies of cheap money?
12.30: Our chief foreign affairs commentator, Gideon Rachman, met with Thailand’s first female prime minister in Davos yesterday:
Yingluck Shinawatra has always struggled with the idea that she is simply a placeholder for her brother – the controversial exiled businessman (and former PM), Thaksin.
In an interview in Davos yesterday, she was studiously vague about whether and when Thaksin will be allowed to return to Thailand – and about his input into the current government.
Yes, she said, she spoke to her brother, every now and then, as did party officials. But it is the cabinet that governs. The future of Thaksin would be decided by the law. The most Yingluck would say is that he was (is) a talented man, who should be allowed to contribute to the future of the country.
Given the recent history of political violence in Thailand – and the animosity of many in the Thai establishment to the Shinawatra clan – Yingluck has to tread carefully. She says that things are much calmer now.
Yingluck Shinawatra, during the session 'Women as the Way Forward'. Copyright World Economic Forum, photo by Moritz Hager
Both main parties have endorsed a truth and reconciliation commission. And, she claims, the new government’s ability to work with the army was demonstrated during the floods.
Yingluck’s real purpose in Davos – like so many leaders - is to drum up business. She was keen to stress that Thailand is rebounding and rebuilding, after the disastrous floods of last year – and predicted growth of over 5 per cent this year.
Thailand’s strategy is to market itself as a hub for the region. And Yingluck – who recently met Aung San Suu Kyi – stressed the huge potential opportunities offered by the opening of Myanmar.
11.45: Chris Giles, our economics editor, has been listening to one of the key debates in Davos today:
At the global economy session at the World Economic Forum, chaired by our very own Martin Wolf, a very large panel – too large for a proper discussion – discussed the challenges facing the global economy. Including the heads of the International Monetary Fund, the World Bank, the Financial Stability Board, but interestingly no-one representing a eurozone country, the debate was more sober than the general mood in Davos of increasing optimism.
Three things stood out.
- There was general agreement that the European Central Bank’s actions to provide unlimited long-term funding for banks has bought a significant amount of time for the eurozone to sort out its crisis. Mark Carney, head of the FSB and governor of the Bank of Canada, made a bold prediction now he thought the risks of a catastrophe had passed. “There is not [now] going to be a Lehman-style event in Europe. That matters”. Similar sentiments were shared among the panel.
- Non-eurozone representatives are clear the eurozone must do more to build a deployable firewall to prevent contagion before they will consider additional resources to the IMF or other efforts to express wider global solidarity. George Osborne, UK chancellor, made the point again about wanting to “see the colour of their money”; Christine Lagarde, although dramatically holding up her hand bag to raise money for the Fund, also accepted that more needs to be done. Developing country representatives had rather more direct recommendations, pointing out that they had to impose difficult policies when they had a crisis and the eurozone should be no different.
- The crisis is not over, despite a more positive mood in Davos and in financial markets. Donald Tsang, the chief executive of Hong Kong, put it best. He told the audience that Hong Kong had a balanced budget, reserves equivalent to two years of public expenditure, full employment and very rapid growth. “It all looks very nice,” he said, adding, “I have never been as scared as now”. His point was that in an inter-connected world, he could not be sure that a blow-up in Europe would not be so serious that it could put even a seemingly-resilient economy such as Hong Kong into a very deep hole.
The optimistic mood in Davos can be seductive, but the nastier reality of the still-troubled global economy has made its presence felt.
11.40: Does Germany’s call for greater eurozone sovereignty over Greece’s budget have historical precedent? This from Gideon Rachman:
I just bumped into a European foreign minister in the corridors – and we discussed the FT story about German demands that the EU take over Greece’s budget.
“Of course”, he said sagely, “this happened a lot during the declining days of the Ottoman empire. But that was in the nineteenth century.”
11.23: Being in charge of the International Monetary Fund is no doubt a challenging role. At least Christine Lagarde, who took the helm at the IMF in July last year, has a sense of humour. Chris Giles reports from the debate on the Global Economic Outlook:
A new take on the begging bowl. As Ms Lagarde finished her opening remarks in the global economy debate, she called for more power and funds for the Fund.
Then she reached back and picked up a rather large handbag, saying, “I’m here with my little bag to collect a bit of money”.
11.10: If you haven’t yet checked out the FT’s front pager today on the German government’s call for Greece to cede sovereignty over tax and spending decisions to a eurozone “budget commissioner” – it’s a must-read.
As Gideon noted below, the proposal is deeply controversial and emotive, since it would greatly extend the power of eurozone leaders over individual member states, and further hack into the principle that sovereignty should reside with a country’s democratically elected government. Athens would also be forced to adopt a law committing state revenues to debt service “first and foremost” - presumably overriding other duties to its own citizens.
The fact that the suggestion comes from Germany – a country already resented by politicians in some eurozone states for its domineering attitude – makes it even more incendiary.
11.03: Chris Giles, our economics editor, also had an interesting evening:
As the wine became older one very senior Indian business leader turned to me and said he had spent 90 minutes with David Cameron and was so impressed he would now invest in Britain and was going back to his finance chiefs to tell them this was the European country of the future. Having been on one of the prime minister’s frankly shambolic trade trips to Asia, I internally dismissed his views.
It was the wine talking, I thought.
Then 20 minutes later, completely independently, another Indian business leader turned to me and said almost exactly the same. The charms of Mr Cameron are clearly working on some in India.
10.54: Gideon Rachman, our chief foreign affairs commentator, reports back from a thought-provoking dinner last night:
Our conversation started with me being given a short lecture on the evils of the Anglo-Saxon press. It turned out that we agreed – however – that the single currency will not survive without some form of fiscal and political union. I said it would never happen. On the contrary, I was told, it’s already happening. “We don’t even need the new treaty, we already have the powers to control national budgets.”
We discussed the recent case of Belgium, where the commission demanded changes in a national budget – and its current action against Hungary.
This morning, I feel remarkably fresh (considering), and I see a remarkable story on the front page of the FT that is very germane to our conversation: Germany wants a budget commissioner to be able to control the Greek budget.
I think that could cause a political explosion – and perhaps I will say so in the panel session I am about to do with Tom Friedman and Nouriel Roubini, on predictions for the coming year.
10.36: Three full days of intense debates, speeches, ‘bilaterals’ with people so important they can’t always be named, canapé-fuelled networking — and still the WEF delegates have another two days to go. We’re only going to be blogging today though, as it seems Sunday in Davos is mostly about repeating what was said during the rest of the week (or in WEF language: doing a “Davos Debrief”).
Just cos it’s Saturday, doesn’t mean there aren’t still some pretty significant and interesting talks scheduled. Here are the highlights from this morning’s programme:
- Global Energy Outlook: how are transformations in demand and supply patterns affecting energy security around the globe? With Yukiya Amano, director-general of the International Atomic Energy Agency
- Pundits, Professors and their Predictions – featuring our own Gideon Rachman aswell as Nouriel Roubini, Thomas Friedman, Robert Shiller and Kishore Mahbubani
- Trust and the Social Contract – featuring among others, Josef Ackermann, chairman of the management board at Deutsche Bank and Stanley Fischer, governor of the Central Bank of Israel
- Global Economic Outlook 2012 - with Christine Lagarde of the IMF, UK chancellor George Osborne, German finance minister Wolfgang Schäuble and Robert Zoellick, president of the the World Bank (hosted by the FT’s Martin Wolf)
For views and opinions on the European Union from Peter Spiegel, Joshua Chaffin, Alex Barker and Stanley Pignal, follow the 