DAVOS, Switzerland (Reuters) - China and Russia blamed debt-fueled consumption on Wednesday for massive financial collapse and called for global cooperation to repair the world economy.
“The existing financial system has failed,” Putin told business and political leaders holding their annual World Economic Forum in this Swiss ski resort.
Growth was based on greed where one center printed money without respite and consumed wealth, and another manufactured cheap goods and saved money, he said.
His clear swipe at the United States was echoed by Chinese Premier Wen Jiabao, who said the bad macroeconomic policies and unsustainable growth models of some countries “characterized by prolonged low savings and high consumption” were primary reasons for the crisis.
Wen also blamed the “blind pursuit of profit.”
Despite the criticism of Western policies, both China and Russia pledged their support for open markets, refuted protectionism and called for the Group of 20 major economies to work swiftly toward a global regulatory system that would put world markets and financial institutions on a safer footing.
Certainly government solutions are in the driver’s seat at meetings of business leaders and politicians in the Swiss mountain resort, a reversal from the usual gathering where Wall Street tycoons rule.
European Central Bank chief Jean-Claude Trichet joined the call for profound reforms to drag the economy back to health and said the G20, whose leaders hold a summit in April, was doing “good work” on policies.
“Everybody can see the present system is too fragile, and we have to reintroduce an element of resilience ... and we need to do that without any consideration of any kind of vested interest,” he told Reuters Television.
Crisis-hit bankers are thin on the ground at the meeting, and the few who did express concerns that governments would stretch too far on the regulatory front and stifle growth got scant hearing. They were promptly reminded that governments are bailing many of them out.
The mood among business people was grim. The International Monetary Fund forecast the world economy would slow to a near standstill this year, warning that deflation risks were rising.
A poll by PricewaterhouseCoopers of more than 1,100 CEOs found that just 21 percent of CEOs said they were very confident of growing revenue in the next 12 months, down from 50 percent a year ago.
Most business leaders said they expected no more than a slow and gradual recovery over the next three years.
“There are no silver bullets. My sense is 18 to 24 months of a very tough economic environment,” Maria Ramos, chief executive of Transnet, South Africa’s rail and logistics company, told Reuters.
Stephen Roach, Morgan Stanley’s Asia chairman, agreed it would be “a long slog” over the next three years.
“Forty percent of the world’s wealth was destroyed in the last five quarters. It is an almost incomprehensible number,” said Stephen Schwarzman, chairman of the leading private equity company Blackstone Group. “Business will be very different.”
Before Wen’s speech, a row intensified over Beijing’s exchange rate policy after new U.S. Treasury Secretary Timothy Geithner branded China a currency manipulator last week, using a term the previous administration avoided for years.
A Chinese diplomat said Washington had enough evidence to know China does not manipulate its exchange rate.
“I don’t think it’s fair all of a sudden to change the position of the U.S. government,” the diplomat said in London, one of the European capitals Wen will visit after Davos.
Wen did not address the row directly in his speech, although his comment on the low savings rate was an indirect reminder that China is financing the United States.
He expects China to post 8 percent growth this year -- not much different from 2008 but down from 13 percent in 2007. The China slowdown coupled with recession in the major developed economies has pushed the global economy into severe recession.
That grim scenario has left sovereign fund Dubai International Capital wary of making big long-term investments even though it sees asset prices at reasonable levels.
“We’re still very nervous about making some big bets -- we see the financial crisis getting worse. There’s not going to be a magic wand solution to the problem,” Chief Executive Sameer al-Ansari told Reuters.
For full coverage, blogs and TV from Davos go to www.reuters.com/davos
Additional reporting by Ben Hirschler, Mike Dolan and Stella Dawson; Writing by Stella Dawson, Mike Peacock and Timothy Heritage; Editing by Richard Hubbard and Erica Billingham