Geithner’s Future And Recession In Britain – OpEd

By Roman Mamonov

One of the main issues on the agenda of the World Economic Forum in Davos this week was the situation in Russia ahead of the presidential elections in March. Investor attention also focused on the US and Britain after Timothy Geithner expressed doubts about his future as US Treasury Secretary, while Britain posted a 0.2% decline in its economic activity over the last three months of 2011 and a record high state debt of over 1 trillion pounds, or more than 64% of the GDP. The Voice of Russia’s Roman Mamonov reports.

Apparently, Chancellor Angela Merkel became the main newsmaker at the forum. She urged Europe to delegate some of the responsibilities to Brussels in order to rescue the economy and regain trust. Overall, Mrs.Merkel set a pessimistic tone for the discussion by saying that Europe had failed to learn lessons from the 2008 economic crisis. Yevgeny Yasin of Moscow’s Higher School of Economics comments.

“The agenda of the World Economic Forum is set by its executive chairman Klaus Schwab. This year, the opening address was made by Angela Merkel which demonstrated that the forum would have to search for a radical solution to the eurozone debt crisis. Until recently, all the decisions adopted in relation to eurozone aimed at reinstating the pre-crisis status quo. It looks like the eurozone countries have reached the limit of their potential.”

The debt crisis took center stage at the forum as the member countries continued to struggle with it but with no success. Unemployment in Spain has reached a record 23 percent. Britain reported a 0.2% decline in economic activity over the last three months of 2011 and a record high public debt of 1 trillion pounds. Finanacial market analyst Andrei Lusnikov however, believes, that Britain is doing well for now.

“Britain refused to join the eurozone and is definitely benefiting from that decision. Should problems persist, the pound could take a dive and this might partially compensate for the current situation. In the eurozone, countries react to economic difficulties simultaneously. As for the public debt, it is high in Britain of course but is fully in line with what is happening in Europe.”

The participants of the Davos forum claimed that Greece, along with Portugal, were likely to pull out of the eurozone in the near future.

Greece, however, is far less pessimistic. This weekend, Athens plans to sign an agreement to have part of its debt written off. However, these kinds of statements have been made before. To make it all worse, Standard & Poor’s threatened to deem Greece’s move to restructure its debts equal to a default.

In the United States, an increase in consumer spending and commodity stock has triggered a hike in the GDP which went up 2.8% in the fourth quarter of 2011 compared to 1.8% in the previous quarter.

The main political intrigue of the week broke out in the US, where US Treasury Secretary Timothy Geithner announced that he might have to quit this year. In his interview by the Bloomberg Agency, Geithner said that President Obama would not keep him in his current job if elected for a second term in November 2012. Nord Capital’s analyst Vladimir Rozhankovsky had this to say.

“Geithner is the last fully fledged economist left in the Obama administration. All prominent politicians who used to shape US financial policies under Obama have already left their posts. Geithner’s departure would draw a logical line under that trend. Investors, however, are unlikely to plunge into despair over all this as in the past year Geithner’s mission has been fairly limited anyway.”

Speaking about the forthcoming presidential elections in Russia, Deputy Prime Minister Igor Shuvalov said Mikhail Khodorkovsky would be granted amnesty if Prime Minister Vladimir Putin wins the vote. Russia’s Sberbank President German Gref made it clear in Davos that Russia would face economic reforms irrespective of who wins the forthcoming presidential elections in March.