Thu, January 28, 2010
DAVOS, Switzerland, Jan. 28 (Xinhua) -- The Davos forum opened its first day of discussions on Wednesday with a focus on how to improve the regulation of the financial sector to avoid future crises and whether the global economy could recover sustainably.
While there is wide consensus that the global financial system needs to be better regulated, participants at the meeting differed on what changes should be made.
In a keynote address to the Davos forum, French President Nicolas Sarkozy called for tighter financial regulation, and criticized unrestrained free-market capitalism.
"There are remuneration packages that will no longer be tolerated because they bear no relationship to merit," Sarkozy said.
He described the remuneration packages as "morally indefensible" because companies that "contribute to destroying jobs and wealth also earn a lot of money."
"From the moment we accepted the idea that the market was always right and that no other opposing factors need to be taken into account, globalization skidded out of control," he said.
But not everyone agreed with Sarkozy's point of view on the opening day of the five-day conference.
Dennis Nally, Global Chairman of PricewaterhouseCoopers, believed that overregulation and protectionism can only do harm to the recovering global economy.
Nally told Xinhua Wednesday during an interview on the sidelines of the forum that CEOs from around the world are concerned with overregulation of financial systems that "could somehow restrict our ability to invest" and with protectionist policies that restrict free trade.
"We're in a period today which I think is better than a year ago, but no one is saying that we're out of the woods yet," Nally said.
Nobody disagrees with the fundamental belief that governments need to improve their regulation of financial systems, he added. But, he continued, there is the complex question of how to make the improvements.
"We need to fix the right types of changes ... and we should not overreact or rush to short-term actions that may sound good or may grab headlines but quite frankly would not serve the fundamental problems all of us need to address," he warned.
"We are in danger of attacking the most visible problems instead of doing what we need to do," said Raghuram Rajan, an expert from the University of Chicago School of Business.
"We could overregulate and go too far and whittle away too much, " Rajan told a session on the so-called "New Normal" of Global Growth.
"We need good regulation, better regulation but not more regulation," said Lord Levene, chairman of British bank Lloyd's, in a separate session.
The panelists also offered their insight on the global economy. "It will be a U-shaped recovery ... and there is a risk of a double-dip recession," said Nouriel Roubini, chairman of Roubini Global Economics Monitor, USA.
He noted that emerging market economies would do better than advanced economies. But the model of export-led growth in emerging economies such as China is now challenged by the fact that countries like the United States are importing less.
China's GDP will exceed that of Japan in 2010, noted Heizo Takenaka, director of the Global Security Research Institute at Keio University in Japan.
He predicted that the recovery of the global economy will be W-shaped, with China and other emerging economies as key contributors to the rebound in growth.
Klaus Schwab, founder and executive chairman of the World Economic Forum (WEF), warned of further crises and called for abandoning the old system.
"Significant work must be done to rebuild a true partnership between governments and business to allow business to remain innovative and enterprising and to create jobs," he said.
According to the WEF chief, it's "dangerous" for world leaders to think that the worst of the crisis is over and "we are back to business as usual."
"The crisis has fundamentally changed our world, and we can no longer revert to the old system," he stressed.
He called on the forum participants to address the new reality and embrace the theme of the meeting: "Improve the State of the World: Rethink, Redesign, Rebuild."
"This means concretely rethinking our values, redesigning our systems and rebuilding our institutions," he explained.
More than 200 working sessions will be held during the five-day gathering, with the participation of some 2,500 delegates from over 90 countries, representing business, government, civil society, academia and the media.
Like previous meetings in the Swiss alpine resort, participants will also talk about security issues such as the situation in Afghanistan and the Middle East.
