January 28, 2010 / 8:15 AM / in 8 years

Highlights: On the global economy from the WEF

DAVOS, Switzerland (Reuters) - Following are highlights on the global economy from sessions and interviews at the World Economic Forum in the Swiss resort of Davos on Wednesday.

JACOB FRANKEL, CHAIRMAN, JP MORGAN CHASE INTERNATIONAL

“We are falling to the trap of excessive interventionism, excessive protectionism. Money policy cannot do anything anymore. Interest rates are zero. Debt is increasing. This might stifle growth. Danger is, with excessive zeal to protect us all from debt crisis, governments will overly activist. Free trade is a win-win proposition.”

GEORGE SOROS, BILLIONAIRE FINANCIER

”We’re not out of the woods and of course increasing resistance to stimulus and debt makes a double dip, particularly in the U.S. where households still are indebted, more likely it was than let’s say three months ago...

”I think actually there’s plenty of room for countries like the U.S. to increase the national debt but it’s of course very undesirable. However, reducing it at the cost of bringing on a slowdown will be counterproductive. It’s more a question of spending of the money wisely....

“I am confident Greece will pull through although there will be some moments when there’s pressure put on Greece from the European Union. The attraction of meeting the conditions are so great there is really no viable alternative.”

ZHU MIN, DEPUTY GOVERNOR OF PEOPLE‘S BANK OF CHINA

”Risk for sovereign debt crisis is real. It seems to me the real risk for the global economy is very weak and volatile economic growth. Currently people tend to be optimistic...

”If you are looking further, the current economic rebound is very weak, it’s supported by government expenditure. We don’t see a very strong growth engine behind the whole thing in the whole world. Soft landing, government stimuli (driven) rebound growth and landing in self sustainable growth. Even if we (have) soft landing, we need to land to structural economic growth. There is no guarantee everyone will be able to do soft landing. That’s potential risk for the global economy today. The U.S. and Europe have around 10 percent of the unemployment rate.....

“It’s (the financial sector) still very fragile. Balance mismatching is still a big issue. Obviously more regulation is deserved....”

”The real risk for the global economy is capital flow. Carry trade for dollar is a massive issue today. It causes huge volatility. Because of dollar carry trade, all money is going to emerging markets. But everyone realizes if U.S. monetary policy changes it will all go back.

It’s every important to have stable yuan. It’s absolutely important that having stable yuan is good for China and good for the world.”

JOSEF ACKERMANN, CEO, DEUTSCHE BANK ”There are some uncertainties about asset inflation, about commercial real estate in some part of the world, sovereign risk and certainly some of the global imbalances.

”We will continue to grow but at a more modest pace, on the global scale... you will see strong growth in the emerging economies...

“We should not underestimate the fact that we are in a transforming phase in the world economy.”

PETER SANDS, CEO, STANDARD CHARTERED

”By spirit and inclination I am an optimist, but there are quite a few risks and I don’t think we should kid ourselves.

”I do not think there will be anything as neat as a double dip or a W -- it will be messier than that.

”The risks I would point to, and they will affect different parts of the world differently, are one there is still a lot of deleveraging to happen, particularly in the West... quite a lot of risk around the exit from monetary and fiscal stimulus initiatives.

”The imbalances are still there and it is hard to see how they get resolved quickly

”There is regulatory and policy risk in the world - missteps, be it protectionism, be it the way banking regulation is shaped, could themselves induce problems, but I don’t think it is quite as simple as, say, a W....

“We collectively underestimate the cost of complexity. if we all do slightly different variants of everything -- Basel II, remuneration regulation -- in every country in the world, it will create enormous amounts of complexity and the visibility of bank management and regulators of what’s going on will be impeded.”

AXEL WEBER, GOVERNING COUNCIL MEMBER, EUROPEAN CENTRAL BANK

“We have to do monetary policy for the (monetary) union as a whole... we cannot take into our decisions developments in certain parts,” Weber told broadcaster CNBC.

“We don’t expect inflation to significantly surpass 2 percent, so what we are seeing is in line with our definition of price stability and on that end, I am not concerned,” Weber told Bloomberg television. “We think rates are appropriate at the time.”

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