Global economy hopes raised after European stimulus

25 Jan 2015 | Author: | No comments yet »

Davos’s gender inequality problem shows why Davos matters.

DAVOS, Switzerland (Reuters) – Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Full of global leaders, policymakers, business gurus and the odd music star, the attendees at the World Economic Forum (WEF) at Davos aren’t short of a dollar or two. Two days after the European Central Bank launched a bold bond-buying drive to revive inflation in the euro zone, a top ECB official warned that Europe’s common currency project could come unstuck if the bloc limped on with sluggish growth and mass unemployment. “We can’t do everything for Europe, we did our part on Thursday, others have to do their part. The ECB announced on Thursday a massive programme of buying government bonds with printed money over 18 months from March in a drive to raise the inflation rate from the current 0.7 percent towards its target of close to but just below 2 percent.

Separately, ECB President Mario Draghi, who did not attend Davos this year, urged governments to redouble efforts to create a “genuine” economic union. But equal opportunity for women is high on the agenda here, with a dozen public and private panels, meals, and other events devoted to the issue, and celebrity champions such as the actor Emma Watson (of Harry Potter fame).

In an advance text of a contribution for the WirtschaftsWoche magazine, Draghi also said reforms were needed to raise competition, cut bureaucracy and improve labour market flexibility. Veteran Davos attendee Rick Goings, CEO of Tupperware, says that gender issues were never mentioned during his first year at the forum, a dozen years ago. Other central bankers in Davos praised the ECB’s bold action, which comes after similar measures in the United States, Britain and Japan, designed to revive the economy and avert deflation. The knitted couture that she sells comes from Italy, meaning the sudden appreciation of the Swiss franc last week – and the cheaper euro – has left her with more than a few problems. “It has really affected us,” she told CNBC. Bank of England governor Mark Carney said there was a greater danger of reckless risk-taking in the financial industry when interest rates were at rock bottom, but regulators were now more aware of the problem and poised to respond.

Her current stock has been discounted, although January sales means this is usually the norm, but she said that her next batch would be priced 20 percent lower. There is a strong business case for closing the gender gap, Goings says: For instance, many of the company’s superstar saleswomen are in countries where their opportunities outside the home are otherwise limited.

With doubts abounding as to whether Western economies face long-term stagnation and prolonged ultra-low inflation, Carney sought to reassure British consumers and savers that the BOE had the means and the will to get inflation, currently at just 0.5 percent, back up to 2 percent within a two-year horizon. This is the kind of clear business message that resonates with the Davos crowd, and one that’s not always apparent amidst the platitudes in the forum’s public sessions.

But will anything come of it, or is women’s equality just the latest Davos fad, to be displaced next year by another equally worthy and intractable cause? I’ve now got a group of people around me who are also all-in on this—we watch what they’re doing and they see what we’re doing.” Those initial connections were made in the Alps. “That’s why Davos matters,” he says. With a Swiss franc that’s now around 30 percent stronger against the euro than it used to be, there’s a real concern that these tourists won’t be flocking anywhere near Switzerland, let alone the town of Davos. The retailers are now all anxiously waiting on whether the hotel rooms will stay full during the year and for next season, with the summer traditionally being a quieter period for tourists. At the check-in desk at the Hotel Europe Davos, in the center of town, there was no talk of cutting prices and with the policy announcement by the Swiss National Bank only last week, it’s still too early to tell whether the holiday goers have been put off.

In the local supermarket the mood was very different, selling mainly Swiss food and drink, prices had not gone up or down and were unlikely to anytime soon, according to staff at the Coop. And with a slew of supermarkets in the town – including the German discount supermarket Aldi, it looks like the grocery industry used to fighting tough battles.

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