Europe debt crisis worries Davos

But everyone on that panel — a Chinese, an Indian, an American, an Israeli and a Briton — seemed concerned about the European sovereign debt crisis.

“The euro zone is certainly one of the biggest risks to the global economy,” said New York University economics professor Nouriel Roubini, who was one of the first to predict the American housing bust and ensuing crisis. “The mood in the market is better, but the fundamental problems of the euro zone remain unresolved.”

Debt levels in some of the peripheral countries, notably Greece and Ireland, are now so high that de facto default is inevitable, Roubini predicted. He urged “an early and orderly restructuring” of their liabilities to avoid spreading the crisis to bigger countries, like Spain.

People’s Bank of China former deputy governor Zhu Min, who is now a special adviser to the International Monetary Fund, was among those who predicted that Europe’s economic growth would trail that of the emerging markets and the United States this year.

“Last year, we had a two-speed recovery,” Zhu said, pointing to an average of 2 per cent growth in Western countries and more than 7 per cent in emerging markets. “This year, we’ll have a three-speed” recovery, with the US pulling ahead of its European counterparts to an estimated growth rate of 3 per cent.

During another panel discussion about the American economy with representatives from business and economics as well as from China, the consensus was that everyone, including Beijing, wanted the United States to succeed. But the panelists did not sound certain that it could. There was praise for the work done by American corporations to cut their debt, and for the history of entrepreneurship in the US.

One theme appeared to resonate with executives and officials from the developed and the developing world alike: the potentially corrosive social effect of widening income inequality across and within many countries. Zhu called it “the most serious challenge for the whole world.”

Martin Sorrell, chief executive of WPP, warned that the negative perception of highly paid bankers in the wake of the financial crisis was turning into a disaffection with the corporate elite.