January 26, 2011 / 11:13 AM / 7 years ago

DAVOS-UPDATE 2-Obama austerity drive gets two cheers from CEOs

* Focus on deficit welcomed but fears it won't be enough

* State of Union speech sets Obama on more bipartisan path

* Budget deficits in U.S. and Europe a top concern in Davos

(Adds Humana, Vestas CEOs, comment on renewables)

By Ben Hirschler

DAVOS, Switzerland, Jan 26 (Reuters) - Business leaders in Davos welcomed the fact President Barack Obama was addressing the United States' gaping budget deficit but questioned whether he had gone far enough to give investors real confidence.

In a speech on Tuesday seen as moving toward the political centre, Obama offered corporate tax cuts and a five-year partial federal spending freeze that he said would cut $400 billion from budget deficits over a decade. [ID:nLDE70P04E]

His Republican opponents, who won control of the House of Representatives last November, say they want to cut spending by $100 billion this year.

"American corporates and Western corporates are really uncertain, and I don't think last night's speech really gets us further in terms of removing that uncertainty," Martin Sorrell, CEO of WPP (WPP.L), the world's largest advertising group, told a panel on the opening day of the World Economic Forum in Davos.

Chris Viehbacher, CEO of French multinational drugmaker Sanofi-Aventis (SASY.PA), which has a substantial business in the United States, said he was pleased the president and Congress were finally focusing on fiscal discipline.

"One of the things that has been curious to see over the past year is the much greater attention to deficits in Europe than in the United States. It bothered me that there was not that attention in the U.S., so I'm very glad and reassured," he told Reuters.

The dire state of government finances around the world is seen as a key threat to economic recovery by business leaders and policymakers meeting this week at the annual meeting in Davos, even as CEO confidence rebounds. [ID:nLDE70K1MC]

Daniel Glaser, chairman and CEO of New York-based global insurance broker Marsh Inc (MMC.N), questioned how successful the United States would be in freezing or cutting public spending.

"Even under (president) Ronald Reagan, spending cuts only really cut the rate of growth of spending," Glaser told Reuters, contrasting U.S. deficit-cutting efforts with the cuts in real public spending levels being implemented by Britain now.

Glaser added, however, that Obama's move towards the political centre was a positive development.

"My personal view is that the American public lives in the centre. That is where the majority is. Congress is not reflective of reality right now."

John Studzinski, senior managing director of U.S. private equity company Blackstone (BX.N), told Reuters Insider in Davos that "the devil is in the details" of Obama's words.

"Innovation is very important. We have to look at American workers," he said. "The debate on spending and spending freeze is predicated on the fact that it's been difficult."


Mike McCallister, CEO of healthcare insurer Humana (HUM.N), said business and the wider public would be looking for results beyond the positive rhetoric.

"They've been talking about jobs for a long time and nothing's really happening. I don't know that this speech makes any substantive changes to where we were directionally," he said.

Nouriel Roubini, economics professor at the Stern School of Business -- known as "Dr Doom" for his pessimistic forecasts -- was sceptical.

"Even what the president proposed last night in the State of the Union is not going to go in the direction of significantly reducing the budget deficit," he told a panel.

One focus of Obama's speech was a drive to boost renewable energy so that by 2035, 80 percent of America's electricity would come from clean energy sources. Ditlev Engel, CEO of Danish group Vestas (VWS.CO), the world's largest wind turbine maker, told Reuters he was very pleased to see the beginnings of a long-term U.S. policy towards renewable energy.

"It all boils down to the subsequent actions but I think it's good see that it is part of the State of the Union address," he told Reuters. "It is positive that it is now being put on the agenda."

For full Reuters coverage, blogs and TV from Davos go to www.reuters.com/davos. (Additional reporting by Paul Carrel and Paul Taylor; Editing by Michael Stott and Hugh Lawson)

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