Davos leaders on defensive as risks loom

GLOBAL leaders flew back to their home countries yesterday to face up to the twin risks of high unemployment and rising inflation that marked the World Economic Forum (WEF) in Davos last week.

The conference tried to sound an optimistic note, with trade between emerging markets flourishing and advanced economies coming out of recession, but many of the keynote speakers were forced to make reactive speeches in light of global threats.

German Chancellor Angela Merkel and French President Nicolas Sarkozy teamed up to defend the euro, with Merkel declaring on Friday: “If the euro fails, Europe will fail.”

Merkel also indicated support for Sarkozy’s calls earlier in the week for more regulation of commodity markets due to price inflation: “The volatility of commodity prices is not only dangerous for those who sell them but those who buy them,” she said.

Meanwhile, Prime Minister David Cameron had to defend the coalition’s ambitious cuts programme after economists at the WEF said that the UK was already in a double-dip recession.

The spectre of unemployment also loomed large, with protests in Egypt and Tunisia underscoring the threat of civil unrest if leaders fail to address the problem of young, economically marginalised populations. Overall unemployment is estimated at nine per cent but among young people it is thought to be much higher.

The Egyptian finance minister Youssef Boutros-Ghali was forced to cancel a planned appearance at a breakfast meeting due to the riots, with the issue of youth unemployment in the Mahgreb being raised in his absence.

And adding to leaders’ woes was the prospect of rising inflation due to quantitative easing. “Money is gradually becoming not worth the paper it’s printed on,” said China Investment Corporation president Gao Xiqing.