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Europe's leaders under fire from davos attendees as US hailed
[DAVOS] Europe's leaders came under fresh fire at the World Economic Forum for failing to boost growth in the region as the US was hailed for turning around its economy.
Europe's politicians are relying too much on monetary policy instead of taking electorally painful steps to revamp labor markets and improve competitiveness, delegates to the conference in Davos, Switzerland, said on Wednesday.
The International Monetary Fund on Tuesday forecast US growth of 3.6 per cent this year, three times faster than its estimate for the euro area. The European Central Bank is widely expected to announce a program Thursday to buy government bonds - a move previously taken by the US Federal Reserve - for the first time to try and fend off deflation.
"The ECB has continuously bought time for European policy makers," said Axel Weber, the UBS Group AG chairman and a former Bundesbank president. "Now Europe's not back, the problems are back."
Mr Weber went as far as to say that "it's very hard" to rule the single currency a success.
That leaves ECB President Mario Draghi, who is not in Davos this year, in the spotlight, with investors expecting him to announce plans tomorrow to buy 550 billion euros (US$637 billion) in government bonds in an effort to boost prices, according to 93 per cent of respondents in a Bloomberg News survey.
The inflation rate in the euro region has fallen below zero for the first time in more than five years and the ECB's chief economist Peter Praet sees it remaining negative for a substantial part of 2014.
Unemployment is near record highs in many euro-area countries compared to jobless rate in the US that is at the lowest since 2008.
The divergence in outlooks was underscored on Wednesday by a Bloomberg Global Poll, with two-thirds of investors saying the eurozone economy is losing ground and more than three in five saying the US is improving.
"Right now the US seems to be the greatest place in the world to invest," said David Rubenstein, co-founder of the Carlyle Group LP.
Mr Weber said the eurozone is still a work in progress and more is needed to integrate its markets and financial systems.
"If that doesn't happen, the project of a single currency area that had benefits becomes increasingly a difficult project to run," said Mr Weber, 57, who sat on the ECB's Governing Council from 2004 to 2011. "Europe has not done enough to dispel those concerns."
Mr Rubenstein identified the region's banks as a weak spot, with their reluctance to lend further threatened by the risk Russian companies will default on their debt and turbulence in currency markets as the euro slides.
Zhang Xin, the billionaire co-founder of Soho China Ltd, said her real estate company had recently withdrawn from an investment project in Europe because of the weak growth environment.
"You have cheap borrowing rates, yet on the demand side you don't know," she said.