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Last Updated: Sunday, 27 January 2008, 20:56 GMT
Davos bosses get a reality check
By Tim Weber
Business editor, BBC News website, Davos

Davos valley
For one week the home to the movers and shakers

If the world's leaders had hoped for a week of relaxed discussions in the Swiss mountains, then the participants of this year's World Economic Forum in Davos got a nasty reality check.

The agenda was already reflecting the worries about the global economy. When the bosses and bankers, the investors and politicians arrived, the stockmarket turmoil and the $7bn bank fraud in Paris added extra urgency to their discussions.

All sessions on the state of the global economy were packed. All agreed that the United States was facing a nasty downturn, many spoke of a recession, and everybody wondered what that would mean for the rest of the world.

This was truly a World Economic Forum, and 'back to business' was the order of the day. After three years when the event was somewhat overshadowed by the Hollywood glitz of celebrity participants like Michael Douglas, Sharon Stone and Angelina Jolie, this was a more sober affair.

Unlike previous years, no big news stories emerged from Davos.

Even the dozens of parties and dinners thrown every evening by the world's largest companies showed "less corporate excess," said Easygroup boss Sir Stelios Haji-Ioannou.

Credit crunch

Instead, the usual networking and schmoozing in the Davos Congress Centre had a much more serious feel about it.

Wherever I walked, snippets of conversations made it obvious that everybody was worried about the economic fallout of the global credit crunch.

But would they rather have been back in their offices?

"No," the boss of a large European bank told me. "It's good to have been here at this time and hear the views of other people in the industry."

'Moderately optimistic'

While the events in the real world were certainly dire, "the mood [in Davos] was moderately optimistic", said Professor Klaus Schwab, the founder and organiser of the forum.

US Secretary of State Condoleezza Rice, Henry Kissinger, Professor Schwab
Davos attracts a unique blend of political and corporate power

Indeed, all top executives I spoke to were fairly confident about the economic prospects.

Yes, markets like the United States would see a downturn, said Michael White, chief executive of PepsiCo International.

But people had to eat and drink even in difficult times, he said, and if there was a slowdown in the US, Pepsi's emerging markets around the world were delivering growth rates of up to 60%.

William Amelio, the chief executive of computer maker Lenovo, acknowledged that there was some reason for short-term pessimism, but for the long-term he was very optimistic. "The economy goes in cycles," he said, and anyway, his company did not do a lot of business in the troubled US consumer market.

Western economists and bankers, meanwhile, worried whether we had seen the full extent of the credit crunch.

"The consumer credit market will be the next domino to fall after sub-prime mortgages," said one banker who did not want to be named.

John Thain, the new chief executive of Merrill Lynch, was more direct. Consumer bankruptcies had soared by 40% in 2007, he said.

People with credit card debt and car loans could potentially be the next group to default - although he stressed that this was not a given.

Davos moments

The forum is about more than going to sessions and debating the world. Davos is about the connections you make, the people you talk to.

Luke Alphey, co-founder of British biotech firm Oxitec and a first-timer here, was amazed at the access he had to politicians and business leaders.

WEF delegate at the Schatzalp farewell lunch
Farewell, see you next year in Davos

"Back in the UK I would not get to them, but here I met them and they are speaking frankly, they say what they really think," Mr Alphey enthused.

Another Davos newcomer was George Osborne, the UK's shadow chancellor. "I had a lot of good bilateral meetings with many finance ministers," he told me.

That left little time for going to sessions, something he hopes to remedy next year.

And what was his Davos moment? "The strangest moment of the week was when I introduced Tony Blair to Mark Zuckerberg, the boss of Facebook," said Mr Osborne.

For Tim Brown, chief executive of design firm Ideo (which helped develop the first mouse for Apple computers and invented the laptop), it was the morning when he stood in a room full of oil company executives and oil ministers to talk about innovation.

"I was later told that I spoke to the people in charge of about 80% of the world oil production," he said.

Next January, they all hope to be back, for another week of talking, listening and schmoozing.



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