US$5 trillion lost in global financial crisis

US$5 trillion lost in global financial crisis

PARIS

Friday, November 28, 2008

A TOTAL of US$5 trillion has been lost in the global financial crisis, the head of the Davos economic forum said yesterday as he announced a record presence of world leaders at the conference in January.

Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be "Shaping The Post Crisis World", said its founder Klaus Schwab.

The Swiss economist, on a visit to Paris, said: "As it stands now, about US$5 trillion has been lost in the financial crisis and now has to be reconstituted" by governments. The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.

"I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment," Schwab said.

He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.

Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five-day forum.

Putin was the only world leader whose presence was confirmed, but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend. The full list will only be released in January.

The violence in India and political unrest in Thailand highlighted political risk as an extra potential threat to emerging markets battered by the global crisis.

A crisis that began last year with the collapse of the US housing market has spread around the world, bringing several financial institutions to their knees and pushing the US, Japan and Europe into recession or to the brink of it.

Central banks around the globe have slashed interest rates to try to ease the flow of credit and restart stalled economies.

Economic sentiment in Europe's single currency zone slumped to 15-year lows in November and inflation expectations plunged, boosting the case for a big rate cut by the European Central Bank (ECB) next week.

"The eurozone is in a deep recession, upping the pressure on the ECB to cut interest rates further," said Christoph Weil, economist at Commerzbank. "We envisage a first move next week on a scale of 75 basis points to 2.5 per cent."

Benchmark rates stand at 3.25 per cent in the eurozone, compared with one per cent in the US.

Amid the crisis, job cuts are also increasing across the globe. Steelmaker ArcelorMittal said it would slash up to 9,000 positions. AFP, Reuters