DALIAN, CHINA // There was a sense of despair at the World Economic Forum this week. Obligations accumulated during a decade of prosperity have created a sovereign-debt and banking crisis that is threatening the US and European economies, marking a dangerous new phase in the three-year-old downturn.
At the meeting, some of the world's sharpest financial minds struggled to keep up with the fast pace of events. Greece lurched towards default, two big French banks were downgraded by Moody's Investors Service, Switzerland defied speculators with a peg to the euro, and the European Central Bank flooded the money market with emergency cash.
Meanwhile, European finance chiefs met in Poland yesterday, together with Timothy Geithner, the US Treasury secretary, and according to the Associated Press, agreed to decide next month on the next crucial payout of bailout loan money to Greece. They said they would disburse the next Ä8 billion (Dh40.6bn) only when they were satisfied that Greece was doing enough to cut its deficit through austerity measures.
Back in China, the assembled financial experts voiced the growing concerns about the financial crisis.
"We are now in a position where we have to place a large amount of faith in politicians to pull us out of our problems," said Victor Halberstadt, a Dutch economics professor who sits on the fiscal crises council at the World Economic Forum.
But political leaders on both sides of the Atlantic appear to be hamstrung by internal opposition. President Barack Obama in the US faces an uphill task to push through his US$447bn (Dh1.64 trillion) jobs plan, and Europe cannot decide what to do if Greece fails to meet tough targets for spending cuts and emergency taxes.
"In the past two years, we observe the politicians trying to muddle through all the issues. I don't think there is any room for the politicians to muddle through the current situation," said Min Zhu, a deputy managing director of the IMF. "You have to take decisive actions today, otherwise you run into crisis."
The host of the forum, Wen Jiabao, the Chinese premier, was stern in his warnings to Western powers, telling them to "put their houses in order".
China is still a pillar for the global economy, having grown at an average annual rate of 10.5 per cent over the past decade and building up $3.2tn of savings. Mr Wen outlined a host of challenges for China's "12th five-year plan", but the certainty conveyed in his outlook contrasted sharply with the confusion in the democratic West.
Leaders of other major emerging markets, which have also survived the global storm with growth intact, saw dangers, too.
NK Singh, a member of parliament in India, said there was widespread confusion over what policies were required to sustain India's growth rate of 8 per cent.
"We see a multiplicity and not necessarily a coherence of global prescriptions over inflation versus growth, on whether growth should be investment-led or consumption-led, on what kind of policies lead to jobless growth, on fiscal rectitude coming in earlier or later before demand gets tighter," he said.
But some definite trends were emerging, he added. The cost of access to global capital was rising, export economies were under threat of protectionism, and exchange rates were volatile.
Things are so bad for the three major currencies - the yen, euro and dollar - that some investors are already turning to the "offshore renminbi" as the new haven, said Victor Chu, the chairman of First Eastern Investment Group.
"You can now go to the Bank of China in New York or Washington and change dollars for renminbi, and at least in a limited way you can protect your savings," he said. "Hopefully in the longer term, that could give also governments another alternative."
Forum organisers were clearly running out of names for what to call the current global financial turmoil. If the 1930s were the Great Depression and 2008 was the Great Recession, was this the "Second Great Contraction", as the title of one forum session suggested?
"It is beginning to sound like the Great Train Robbery," joked Prof Halberstadt. Little did he know that the Swiss banking giant UBS was about to reveal that a rogue trader had lost $2bn betting against the Swiss franc.