At the last World Economic Forum in Davos there were frantic secret meetings on saving the euro and private straw polls on whether the euro zone would break up and how soon Greece would be forced out.
Brexit’ has replaced ‘Grexit’ as Davos man’s nightmare
Twelve months on, the euro’s survival is widely taken for granted by the policymakers and business leaders attending the annual forum, and the EU’s top economic official has time to go skiing while in the Swiss mountain resort.
“I recall last year in 2012, Davos was full of uncertainty about the euro zone,” European Economic and Monetary Affairs Commissioner Olli Rehn said in an interview.
“Last year there was a very tense mood here. This year I think we are seeing a sentiment moving from stabilisation to recovery, and that means I should get a chance to do some cross-country skiing.”
Perhaps the most striking change in this year’s annual gathering of the captains of business, financial services and government is how little talk there has been about the euro.
The familiar prophets of doom are silent, or at least muted.
Indeed, there was far more discussion in the cavernous Congress Centre and the luxury hotels that surround it of whether Britain will still be in the European Union in a few years’ time after Prime Minister David Cameron’s speech promising an in-out referendum within five years.
‘Brexit’ has replaced ‘Grexit’ as Davos man’s nightmare.
Cameron got a warm reception when he addressed the global forum as chairman of the Group of Eight major industrialised nations with a rousing call for free-trade agreements, more open markets, greater competition and a crackdown on tax avoidance.
But his comments on the EU were more divisive. “To try and shoehorn countries into a centralised political union would be a great mistake for Europe, and Britain wouldn’t be part of it,” he declared.
BBC Economics Correspondent Stephanie Flanders drew applause that reflected many participants’ unease when she asked Cameron whether he thought the business community welcomed the prospect of five years of uncertainty over Britain’s future in the EU.
Dutch Prime Minister Mark Rutte, a close Cameron ally in pressing for greater economic liberalism in the EU, said a British vote to leave would be a disaster, but he did not think it would happen.
Last year, the economic elite were hanging on every word of German Chancellor Angela Merkel’s speech, in which she rejected pressure to increase the size of the eurozone’s rescue fund for troubled states.
The key to reassuring markets was to restore lost trust in government policies, she said.
In the end, Germany did accept a somewhat bigger financial firewall, and a European bailout of Spain’s banks. But it was a pledge by European Central Bank chief Mario Draghi last July to do whatever it took to preserve the euro that was the turning point in the crisis.
Berlin’s decision in August, after months of hesitation, to keep Greece in the currency area at the cost of more financial aid and a possible future writedown of Greek debt owed to eurozone governments was the other big inflection point.
Investors and business consultants say they see signs of investment returning to the eurozone, although not necessarily to all of its troubled fringes.
The main concern of political leaders, central bankers and investors is that European leaders should not get complacent and let up on economic reforms now the existential crisis is over.
Asked what her biggest concern was for 2013, IMF managing director Christine Lagarde listed the fiscal problems of the United States, Japan and Europe, and keeping up the momentum of structural economic reform in all three areas.
The WEF’s Global Risks report, compiled a few weeks before the Davos meeting, listed a possible systemic financial system failure as one of the top five concerns, citing a persistent threat from the eurozone, even though it has avoided break-up.
“The current eurozone instability will continue to shape global prospects in the coming years,” the survey of 1,000 experts and industry executives found.