This year’s big economic story isn’t the Euro…
Here we go again. The High Streets are full of bargain-hungry shoppers, the Christmas decorations are back in their boxes, New Year’s resolutions are still just about holding, and a certain ski resort in Switzerland is readying itself for an influx of global economic power-brokers. The World Economic Forum is about to descend, once again, on Davos.
The Eurozone’s enduring sovereign debt crisis has dominated Davos for the past few years, reaching fever pitch as it lurched from one potential calamity to another. The currency’s very survival has been the hot topic in this freezing Swiss town of late.
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 ever more extreme and nonsensical, going round in circles until there was nothing more to add beyond simply saying, “what a mess.”
This year’s bête noir is an easy one to predict: the parlous state of the budgetary process and political machinations in the United States will, almost inevitably, 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, February will see the postponed US$100 billion budget cuts right back at the top of the agenda. At exactly the same time, the US Treasury’s ability to juggle the monetary balls under the debt ceiling will be curtailed.
The feat of financial chicanery that the Treasury’s “debt suspension period” represents is truly extraordinary. Frankly, if you or I were to attempt it with our credit cards we would be locked up.
But that is not the only fiscal contortion the U.S. is currently enduring: the expiration of yet another resolution will see Congress unable to spend money, potentially plunging this giant economy into its biggest crisis yet.
The upshot of all this is that 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 a ‘yes’. In the cold light of day few really believe that the U.S. will not avoid such a fate. That said, you can bet that they will take us right to the edge first – a fact that will be preoccupying many at Davos next week.
Speculation will focus on the dysfunctional political process that seems to have hamstrung America so completely. Quite rightly, many will be asking if it is broken beyond repair. Does the crisis on the American side of the Atlantic actually present a greater threat than the sovereign debt crisis on the European side? Which coast are the global economy’s hopes more likely to be dashed upon? It is hard to tell.
Every year Davos picks a banner topic under which the conference is supposed to take shape. In 2013 it is ‘Resilient Dynamism’. I have absolutely no idea what this means. WPP’s Sir Martin Sorrell, rather eloquently, calls this kind of thing “Davosian language.” What that basically means is that you can interpret it pretty much any way you wish.
If all this sounds a little cynical, I don’t mean it to. Well, not completely anyway. Hearing some of the world’s most finely tuned minds grapple with these concepts is a privilege and something I always enjoy. Davos will be heaving with the global economy’s rock stars, and the panels, speeches and meetings taking place here can be fascinating.
What you cannot expect to come from Davos are actual decisions. Those just don’t get made. What will emerge, however, is a picture of exactly where the political and economic pitfalls are located, and ideas as to how we might avoid them. Davos allows us to take stock and to reset. Everyone will know where the major players stand, and where alliances might be made.
Those alliances will be crucial to the year ahead of us, not least the ones that might be forged, against the odds and expectations, on Capitol Hill.
Richard Quest is a CNN International Business Correspondent and Presenter based in London, host of the one-hour program “Quest Means Business” airing on CNN from Tuesdays to Saturdays at 6am and 2pm AEDT. For program highlights and more, go here
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