Opinions - 02.02.2011 - 00:00 

Challenges to the "new reality"

For a conference devoted to a "new reality" the events surrounding Davos served as a potent reminder that little of what is "new" is "real" and what is "real" need not be that welcome. A Comment by Professor Simon Evenett.


2 February 2011. "The best laid plans of mice and men often go awry." Nothing bears this out saying out better than events surrounding Davos 2011, where the real world rudely intruded on the packaged media plans of business and government elites.

Just when leading emerging market governments, such as China, were projecting themselves as a stable part of the "new reality" (this year's Davos theme), the Presidents of Tunisia and now Egypt were deposed. Thirty year-old assumptions concerning the Middle East and North Africa are being upended, undermining confidence in this brave new world.

Even closer to home, European leaders choreographed their defence of the Euro at Davos. This message was undermined by the premature collapse of the Irish government. Early elections are soon to follow and one can expect the renegotiation of its bailout package to be the top demand of opposition parties. All of this will trigger further financial instability, while European governments dally implementing in full the bailout fund they launched to much fanfare last year. What a pity that Davos 2011 wasn't used to finalise a reinforced package of European reforms: once again, bold statements of intent supplanted substance.

Bankers too had a clear message for the Davos audience: Lay off us, we've suffered enough! News from London of possible plans to break up universal (aka too-big-too-fail) banks was met with incomprehension by the bankers. The seven figure bonuses that were announced for many bank CEOs last week didn't sit well with the austerity facing many households.

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