DAVOS, Switzerland (AP) — Secretary of State Condoleezza Rice, in a nod to the anxiety that has enveloped the World Economic Forum, said yesterday that the U.S. economy was resilient and would remain an “engine of growth.”
Speaking to an audience of chief executives and world leaders, Miss Rice said the $150 billion stimulus package proposed by President Bush would “boost consumer spending and support business investment this year.”
Her remarks came after two days of wild market swings worldwide and the surprise Federal Reserve interest rate cut on Tuesday lowered its benchmark rate to 3.5 percent from 4.25 percent in between regular policy-setting meetings.
“I know that many are concerned by the recent fluctuations in U.S. financial markets, and by concerns about the U.S. economy,” she said. “President Bush has announced an outline of a meaningful fiscal growth package that will boost consumer spending and support business investment this year.”
She said U.S. Treasury Secretary Henry M. Paulson Jr., who canceled his own visit to the World Economic Forum annual meeting at the last minute, was “leading our administration’s efforts and working closely with the leaders of both parties in Congress to agree on a stimulus package that is swift, robust, broad-based and temporary.”
The U.S. economy is “resilient, its structure sound, and its long-term economic fundamentals are healthy,” she said. “And our economy will remain a leading engine of global economic growth.”
Formally opening the forum yesterday, Afghan President Hamid Karzai gave a sobering rundown of recent attacks attributed to Islamic extremists — among them the assassination of Benazir Bhutto.
He said that the whole world could suffer from the “wildfire” of terrorism engulfing his region, a grim message for a meeting of political and business leaders already fretting over the threat of global recession.
How to stem terrorism is one of the themes at this year’s World Economic Forum, along with dealing with climate change, implementing a workable peace process in the Middle East and discussing how technology is ushering in a new age of social networking that knows no borders.
Still, with many participants watching stock markets slump and sharing the realization that economic downturn can breed political turmoil, the main focus yesterday was on the chances for worldwide recession.
But many leading participants shared the view that the world cannot escape the effects of the U.S. economic slowdown, marked by the subprime mortgage crisis, loss of business confidence, poor corporate profits and a sharp drop in stock prices.
A year ago, Davos attendees predicted the global economy would move ahead with confidence. But now many seemed to share a glum mood that the world could be sliding into recession.
Billionaire George Soros called for a radical cure — the imposition of heavy regulation and oversight over financial markets whose participants he accused of using “excessive” freedom to create “not a normal crisis but the end of an era.”
“Authorities ought to go in and examine the books” of financial institutions, and provide assurance that “they will rescue and even take over banks that become insolvent,” Mr. Soros said.
He argued the U.S. Federal Reserve has kept interest rates too low for too long.
Mr. Soros predicted a realignment of power and wealth, with the developed world suffering a recession while the developing world continues to grow.