Downcast at Davos

It’s getting unbearably cold for the Europeans in Davos. The World Economic Forum’s annual do at the Swiss ski resort has the rest of the world and some of Europe’s own — the United Kingdom — telling the 27-member block that “beyond-the-means” living by member-countries has brought the world economy to the edge,the second time in less than four years. Global leaders,including those from the United States that triggered the 2008 crisis,could not stop taking pot-shots at Europe for first its profligacy and now for exacerbating the crisis by taking for ever to resolve it. The European Union is finding it difficult to swallow this ignominy,but some leaders,especially Angela Merkel and Nicolas Sarkozy,are putting up a brave face. They keep repeating Greece will not default on its 350 billion euro debt but are not sure how soon a package will be ready.

There is definitely a deficit in the political will to quickly and fully address the Greek debt crisis. Fears of Italy and Spain making similar bailout demands are not ruled out. If Europe does not emerge out of the current morass,it will sap the energies of emerging countries and pull the world economy into a downward spiral. As Mexican President Felipe Calderon,who holds the G-20 chair,says,it is time EU took the bazooka out lest the gunpowder gets wet. Hopefully,a solution will be in place when eurozone leaders meet in Brussels on Monday. Of course,there are no easy answers. The wise say,it is time Greece and others cut budgets and opted for extreme austerity measures. The wiser feel such a spending freeze will kill the growth momentum.

Clearly,the world is headed for a slowdown in 2012. IMF says the world economy will grow 3.25 per cent,slower than the 4 per cent it predicted four months ago. The 17 nations that share the euro will shrink 0.5 per cent. This is still optimistic compared with the World Bank that estimates the world GDP to grow just 2.5 per cent. Amidst such downcast weather at Davos,India’s growth projections,of 7 per cent this year and the next,bring sunshine.

But India cannot be happy that it turns out to be a default option for investment. It has to meticulously remove irritants that hold back foreign investment. It has to sort out its own mess of regulatory clearances. Land acquisition cannot be made so prohibitive or expensive to drive away business. Doing business is anyway not easy. India can’t afford to make it worse.