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DAVOS-PREVIEW-Problems pile up for post-crisis world

Published 01/20/2010, 10:10 AM
Updated 01/20/2010, 10:12 AM

* Davos forum to review slow pace of reform, exit strategy

* Record numbers, but many U.S. bankers stay away

* Climate change and Haiti also on agenda

By Jonathan Lynn and Ben Hirschler

GENEVA/LONDON, Jan 20 (Reuters) - The world economy is back from the brink after a mammoth $5 trillion in fiscal and monetary stimulus but the list of things for the rich and powerful to worry about in Davos next week is longer than ever.

Perhaps the biggest unknown for 2010 is how smoothly the world's central banks can withdraw the monetary crutch that buoyed markets in 2009.

Beyond that, the worsening finances of both governments and individuals raises the spectre of sovereign debt defaults and may also mean the next leg of the crisis is social, Klaus Schwab, executive chairman of the World Economic Forum that organises the Davos gathering, said on Wednesday.

"As a consequence of the debt situation of governments, of the fiscal situation of governments, we will have certainly squeezed public and private households and we will have increased unemployment figures," Schwab told a news conference.

Greece's ballooning debt has loomed largest for financial markets in recent weeks but other European countries are also deeply in the red and ratings agencies have warned that the credit of even the United States is not invulnerable in the longer-term.

World leaders and policymakers will gather in record numbers for the annual Davos forum from Jan. 27 to 31, although top Wall Street bankers will be thin on the ground.

Many U.S. bankers are shunning the event for the second successive year in a sign they remain wary of being seen at the Swiss ski resort at a time when they are still being criticised for their role in the financial crisis and over massive bonuses that are being paid out to their staff.

PATIENCE RUNNING OUT

The WEF prides itself on building bonds between corporations and the wider world -- but its own research suggests the public's patience with big business may be running out.

A survey, based on 130,000 respondents on Facebook, found only one quarter of people believed that large, multinational companies applied a values-driven approach to their business.

The five-day gathering, meeting this year under the motto "Rethink, Redesign, Rebuild" with 2,500 participants, will take no decisions but brings together a wide spectrum of movers and shakers to seek solutions to the world's most pressing problems.

Schwab, a German professor of business studies, founded the forum 40 years ago and his pulling power is reflected in the list of speakers.

French President Nicolas Sarkozy will open the event, which will feature sessions with South Korean President Lee Myung-bak and Canadian Prime Minister Stephen Harper, respectively chairs of this year's G20 and G8 summits.

In an effort to pick up the pieces after last month's Copenhagen meeting, the forum will discuss climate change with Mexican President Felipe Calderon, who will chair the follow-up climate summit later this year.

A panel on Saturday Jan. 30 on the global economic outlook will include top White House economic adviser Larry Summers, the managing director of the International Monetary Fund, Dominique Strauss-Kahn, French Economy Minister Christine Lagarde, and the deputy governor of China's central bank, Zhu Min.

Another session will look at the uneven and often sluggish pace of reform of financial regulation, with European Central Bank President Jean-Claude Trichet on the panel.

The forum has added a special session on Haiti with former U.S. President Bill Clinton, the U.S. special envoy, and is launching an initiative to encourage business to make long-term investments in the Caribbean state to sustain recovery.

As global capitalism's foremost annual gathering, the forum attracts plenty of opposition -- but the Swiss government imposes tight security to protect the elite. A small protest is scheduled in Davos itself on Jan. 28, and protests in the Swiss cities of Lucerne and Basel are due this and next weekend. (Additional reporting by Martin Howell in New York, editing by Mike Peacock)

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