DAVOS, Switzerland (AFP) – The world economy is recovering but remains fragile and dogged by huge deficits, top officials said Saturday at the end of a Davos summit clouded by divisions over banking reform.
Asia is leading the resurgence after the worst crisis for decades with China eyeing double-digit growth, but the United States and Europe remain dogged by unemployment and the euro zone is grappling with a crisis over Greece.
International Monetary Fund (IMF) chief Dominique Strauss-Kahn said "The fiscal sustainability problem is going to be one of the biggest, maybe the biggest problem…. We’ll have to deal with this for five, six or seven years, depending on the country."
A bust-up over US plans to curb risk-taking by banks again took centre stage on the last day of the World Economic Forum, with central bank chiefs huddling with finance ministers and officials, and top private bankers.
The meeting brought together British and French finance ministers Alistair Darling and Christine Lagarde, European Central Bank Chief Jean-Claude Trichet and the heads of top private banks."There’s going to be regulation, they (the bankers) understand that," said US Congressman Barney Frank, one of the few willing to talk after the closed-door meeting.
The banking issue has clouded the four-day Davos meeting, starting with French President Nicolas Sarkozy’s opening address in which he backed US President Barack Obama’s tough clampdown plans.
At the same time there has been cautious optimism about the outlook for global recovery after the near-meltdown of the last 18 months.
Chinese and Indian delegates have trumpeted their country’s healthy growth rates of nearly nine and seven percent respectively, and the United States hailed Friday’s unexpectedly-rosy 5.7 percent GDP growth figure.
But unemployment remains a worrying problem in the United States and Europe, which both have a jobless rate of around 10 percent, despite a return to overall growth.
France‘s Economy Minister Lagarde said "Balancing between the recovery process that has to continue, the reform that needs to be maintained and the restoring of public finances is a tough line to draw."