German chancellor Angela Merkel has pledged to restore her country to its position as the economic engine of Europe and to slash bureaucracy in Germany and in the European Union.
Opening the 36th Annual Meeting of the World Economic Forum in Davos, Switzerland, Ms Merkel said that Germany and Europe had to be more open to change and innovation if they wanted to create a new social framework and regain their position in the world.
She said her government would streamline German bureaucracy, cut debt, create a more stable fiscal policy to inspire confidence in foreign investors and invest more in innovation.
"We have to remove the obstacles, open the windows and breathe fresh air," she said.
Ms Merkel said that popular fear of globalisation owed much to the fact that the public felt that politics had lost the power to influence and shape events. Although Germany had been among global market leaders in computer and information technology 30 years ago, it had failed to keep pace with the growth of the industry and must build its capacity.
"China, India and many other countries have this capability. We have to face up to the competition," she said.
Earlier yesterday, economic experts at Davos identified a further rise in oil prices and a decline in US consumer spending as the biggest risks facing the global economy in 2006.
Stephen Roach, chief economist at Morgan Stanley, said there was "a dangerous degree of complacency" among investors and policy makers after the robust economic performance in 2005.
He said that the property bubble in the US was beginning to fade, with mortgage applications down 45 per cent from a peak last year, leaving consumers with "a very weak underlying base of domestic labour income generation" - or wages - and low savings.
"This is the year you have to watch out for the end of the great American spending binge," he said.
Participants agreed that oil prices are likely to remain high in 2006, driven by rising demand from countries like China and India and limited options for increasing supply.
Min Zhu, assistant president of the Bank of China, predicted that China's economy would grow by about 9 per cent, a slight slowdown from last year's growth of almost 10 per cent. He warned, however, that China's growth was driven almost exclusively by exports and investment spending, a trend that may be unsustainable over the medium term.
At other sessions, participants expressed concern at the environmental impact of current growth rates in China and India, although a survey of chief executives by PricewaterhouseCoopers found that 55 per cent plan to invest in China within the next three years, 36 per cent plan to do more business in India and 33 per cent are looking to Brazil for investment opportunities.
Most business leaders said they were more interested in winning market access in China than in outsourcing jobs or producing goods more cheaply there.
A discussion on the future of jobs presented a gloomy picture for workers in the West who yearn for job security, employment-related health care and a defined benefit pension. US labour secretary Elaine Chao said that the average 34-year-old American had already had nine jobs and argued that pensions and health plans should be made portable and flexible to adapt to the reality of contemporary working life.
Jagdish Bhagwati, professor of economics at Columbia University, said it was impossible to predict the skills shortages of the future and that workers should be trained to adapt to meet new demands.
