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DAVOS, Switzerland (Reuters) - Just as they were getting their swagger back, the global elite stumbled last week on an emerging market sell-off that served as a reminder of the risks the global economy still faces.
Veterans of the annual World Economic Forum in Davos seized on the wobble as a warning that expectations for a smooth upswing were misplaced, and that recovery would likely be volatile and uneven.
The euro zone crisis is out of its acute phase and growth is returning across the developed world but a revival fuelled largely by vast amounts of new central bank money is a capricious one.
The prospect of the U.S. Federal Reserve turning off its money taps this year, combined with political troubles in several emerging markets, drove last week's sell-off and exposed some of the unresolved problems in both developing and advanced economies.
"I hear way too much optimism now," Larry Fink, CEO of investment group BlackRock, told the forum.
"I think the experience of the marketplace this week is going to be indicative of this entire year. We are going to be in a world of much greater volatility."
The return of growth in the United States, Japan and Europe masks festering problems from chronic youth unemployment to skills shortages and rising inequality that dampened any hubris in Davos.
Tech executives were exuberant about breakthroughs that are revolutionising production, healthcare and communication but others warned those advances may kill jobs.
CEOs in Davos complained more vociferously than ever about a lack of talent for hire despite sky-high unemployment in rich and poor countries alike.
In the West, too many young people are graduating from expensive colleges with high debts and the wrong skills, while in developing countries a big majority are not achieving their economic potential.
Worldwide unemployment hit nearly 202 million in 2013, an increase of 5 million compared with a year earlier, the International Labour Organization reported last week.
Joe Kaeser, chief executive of German engineering giant Siemens, questioned whether the world was really seeing an economic recovery at all.
"Do we feel good because what we see is good?" he asked. "Or do we feel good because we just have eased the pain? How many jobs have we created? How many of those millions and millions of jobless people in Europe have we put into jobs?"
The year ahead will witness a marked shift in the balance among the world's main growth engines, with the United States and other developed economies contributing more and emerging markets somewhat less than before.
Reduced Fed bond buying will reverse the liquidity that has flooded into higher-yielding emerging markets assets.
"We expected this year to be a volatile year for EM as the Fed tapers," Mexican Finance Minister Luis Videgaray said, adding that volatility "will happen throughout the year as tapering goes on".
Despite particular worries in countries like Argentina and Turkey, CEOs are still determined to tap into the growing middle classes of the new mega-cities of Asia, Latin America and Africa. But they are becoming more selective.
The notion of lumping together diverse economies like Brazil, Russia, India and China has gone.
BlackRock's Fink said the Fed's tapering was just an excuse for turmoil in some emerging markets. The real cause was "bad policy" in the countries affected.
Renault-Nissan chief Carlos Ghosn, whose company has car plants in many emerging markets, said: "You have to be ready when you invest in emerging markets for ups and downs."
In the short term, investors are braced for more downs.
"We are on the cusp of a slowdown in emerging markets," said Scott Gordon of Taconic Capital Advisors. "There is a higher proportion of developed market growth that will drive the global economy."
Yet advanced economies also have work to do to put their houses in order.
"Complacency is both the positive and the negative of Davos this year," said John Studzinski, global head of Blackstone Advisory Partners. "On the one hand, we're not looking at the break-up of the euro zone anymore and people are more relaxed.
"On the other hand, people are not paying attention to things they need to, like the education reform that is needed to resolve mismatches in the workforce, particularly in Europe and the United States."
Even as headline growth numbers improve, few citizens are feeling the recovery. A survey by consulting group Alix Partners of 6,000 adults in six European countries conducted in mid-January showed 71 percent of those questioned saw the economy staying the same or getting worse over the next year.
Christine Lagarde, managing director of the International Monetary Fund, warned policymakers of "some of the old risks that have not yet been completely fixed", added to which is the threat of deflation in Europe.
A case in point is a European Union plan to curb banks' ability to take market bets with their own money, which Germany and France have attacked, warning in a paper seen by Reuters that it could jeopardise a delicate revival.
In some cases, European policymakers cannot even agree on the problems they should be tackling.
German Finance Minister Wolfgang Schaeuble publicly disagreed with EU Economic and Monetary Affairs Commissioner Olli Rehn's view that prolonged low inflation in the euro zone would make necessary economic rebalancing harder.
Schaeuble called that view "nonsense".
Both Rehn and French Finance Minister Pierre Moscovici said the European Parliament could still "improve" a complex system for winding up failed banks agreed by the EU last month. Schaeuble said there was little scope for change without breaching EU treaties.
Joe Jimenez, chief executive of Swiss drugmaker Novartis, said the conversation at Davos had shifted from five years of angst over financial crisis to talk of economic recovery, but companies were still hesitant about the levels of investment which could drive lasting growth.
"If we had the certainty I think you would see more and more companies around the world leaning forward in terms of investment," he said.
Additional reporting by Alessandra Galloni and Paul Taylor. Editing by Paul Taylor and Mike Peacock