Business warns regulation may crimp recovery
By Ben Hirschler and Martin Howell
DAVOS, Switzerland (Reuters) - Global business leaders warned Western governments on Wednesday that a populist crackdown on the financial industry could crimp a fragile recovery from the worst recession since the 1930s.
The worried response to U.S. President Barack Obama's plans to curb big banks and a British assault on bankers' pay came as 2,500 business leaders and policy makers met at the annual World Economic Forum in the Swiss ski resort of Davos.
French President Nicolas Sarkozy delivered a tirade against the excesses of financial speculation, deregulation, the bonus culture and accounting tricks which he said driven the world economy to the edge of the abyss a year ago.
Only concerted government action had saved the world from financial meltdown, he said, and the first glimmers of recovery should not be a signal to let up on regulatory reforms.
"We can only save capitalism by refounding and moralizing it," Sarkozy said in a keynote address, warning central banks against an abrupt withdrawal of monetary stimulus measures that might trigger a collapse of the world economy.
Surveys produced for the conference showed global economic confidence on the rise after deep gloom in 2009 and a cautious return to hiring, especially in emerging markets.
But the specter of uncoordinated, heavy-handed regulation and government intervention in the economy was the biggest cloud on many business leaders' horizon. Uncertainties over whether China will rein in its feverish pace of growth and concerns about how Greece will tackle its debt crisis also weighed.
Obama jolted markets on January 21 with proposals to force commercial banks to cut ties with hedge funds and private equity funds and to stop proprietary trading. Obama also said he wanted the financial sector to pay for a massive taxpayer bailout. Continued...