IT’S that time of year again. High streets are full of bargain-hungry shoppers, Christmas decorations are back in their boxes, New Year’s resolutions are still holding, and a ski resort in Switzerland is preparing itself for an influx of global economic power-brokers. The World Economic Forum is about to descend on Davos.
The Eurozone’s enduring sovereign debt crisis has dominated Davos for the past few years, with the currency’s very survival the most recent hot topic. As Greece looked to be heading for the exit door, and some delegates wondered if it was all a big German conspiracy to control Europe, eyes turned to China as the global economy’s potential saviour. The debate became increasingly extreme and nonsensical, going round and round in circles.
This year’s bête noire is easy to predict: the parlous state of the budgetary process and political machinations in the US will dominate proceedings. America avoided the abyss beyond the fiscal cliff (in spite of Congress, rather than thanks to it), but any one of the deadlines created by the last minute deal could unsettle global markets this year.
To begin with, despite recent moves by Republicans to potentially extend the deadlines, we will soon see the postponed $100bn (£63.1bn) in budget cuts back at the top of the agenda, when the US Treasury exhausts the legal cap on its total borrowing as set by Congress. Its ability to juggle the monetary balls under the debt ceiling will be curtailed.
But that is not the only fiscal contortion the US is currently facing: the expiration of another resolution will soon see Congress unable to spend money, potentially plunging the economy into its biggest crisis yet. America is gearing up for another internal scrap that could mean cutbacks, a default, or even a complete economic shutdown.
Is all this talk a little hysterical? Like so much of the debate around the economy’s woes, the answer is probably yes. Few really believe that the US will fail to avoid such a fate. But speculation at Davos will focus on the dysfunctional political process that has hamstrung America.
Each year, Davos picks a banner topic under which the conference is supposed to take shape. In 2013, it is Resilient Dynamism. I have no idea what that means. WPP’s Sir Martin Sorrell rather eloquently refers to it as “Davosian language”. This means you can interpret it however you wish.
I don’t mean to sound cynical, because Davos will be heaving with the global economy’s rock stars, and the panels, speeches and meetings taking place will be a privilege to attend. But you cannot expect actual decisions from Davos. What will emerge is a picture of exactly where the political and economic pitfalls are located, and ideas on how we might avoid them. Everyone will know where the major players stand, and where alliances might be made. And those alliances will be crucial to the year ahead, not least the ones that might be forged in Washington.
Richard Quest is CNN’s business correspondent. He presents Quest Means Business live from Davos, daily at 7pm GMT on CNN International.