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Jan 24, 2008
Karzai warns of spreading terrorism
Afghanistan's president warned Wednesday that the whole world could suffer from the "wildfire" of terrorism engulfing his region, a grim message for a meeting of political and business leaders already fretting over the threat of global recession.
Formally opening the World Economic Forum, Hamid Karzai gave a sobering rundown of recent attacks attributed to Islamic extremists - among them the assassination of Benazir Bhutto and bombings in Afghanistan and Pakistan that have killed hundreds, including many children.
With militant violence still on the rise in the two nations six years after the ouster of the Taliban, "it seems like the mutant of extremism is dangerously unleashed across the region," Karzai said. The trend "bodes terribly badly for the whole world," he said.
In an apparent allusion to Pakistan - whose president, Pervez Musharraf, originally supported the Taliban - Karzai called terrorism "a venomous snake that some among us tried to nurture and befriend at the expense of others, which I hope we realize now was a mistake."
Musharraf, now a U.S. ally in the war on extremist groups, has often been accused by Karzai of not doing enough to shut down sanctuaries for Taliban fighters in Pakistan's tribal region along the border with Afghanistan.
The Pakistani president is attending the conference in Davos as well, as part of a European tour seeking to reassure the West that he is in control of his country after months of political instability and increased attacks by Islamic militants.
Both leaders held separate talks Wednesday with Secretary of State Condoleezza Rice, but there was no indication they would meet with each other.
Musharraf spokesman Rashid Qureshi told The Associated Press the meeting with Rice "went very well," saying there was "total consonance and unanimity of views" on joint efforts to fight terrorism.
How to stem terrorism is one of the themes at this year's World Economic Forum, along with dealing with climate change, implementing a workable peace process in the Middle East and discussing how technology is ushering in a new age of social networking that knows no borders.
Still, with many participants sharing a realization that economic downturn can breed political turmoil, the main focus Wednesday was on the chances for worldwide recession.
World markets remained volatile Wednesday, with Asia closing up and Wall Street staging a stunning comeback but European stocks falling despite the U.S. Federal Reserve's surprise interest rate cut the day before aimed at shoring up the sagging American economy. The fireworks added weight to fears at Davos that the world could be sliding into recession.
Rice, in a nod to the economic anxiety, told an audience of chief executives, politicians and others that the U.S. economy is resilient and will remain an "engine of growth."
She urged the world to "have confidence in the underlying strength of the global economy - and act with confidence on the basis of the principles that lead to success in today's world."
But many leading participants shared the view that the world cannot escape the effects of America's economic slowdown, marked by the subprime mortgage crisis, loss of business confidence, poor corporate profits and a sharp drop in stock prices.
A year ago, Davos attendees predicted the global economy would move ahead with confidence. But now many seemed to share a glum mood that the world could be sliding into recession.
"We're in Round 1 or 2. This is a 15-round fight," said Guillermo Ortiz, governor of the Central Bank of Mexico, suggesting the worst might yet be coming.
"Authorities ought to go in and examine the books" of financial institutions, and provide assurance that "they will rescue and even take over banks that become insolvent," Soros said.
He argued the U.S. Federal Reserve has kept interest rates too low for too long.
Soros predicted a realignment of power and wealth, with the developed world suffering a recession while the developing world continues to grow.
Russian Finance Minister Alexei Kudrin suggested his country and others with large gold and currency reserves could help the world economy weather the crisis by providing a financial cushion.
"Of course, we have become more dependent on the world economy, and this (crisis) will affect us, but we have a good system of defense and immunity," he said. "And therefore I think it will affect us less than the leading markets."
Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy in Singapore, said Asia, too, might weather the storm. If China's economic growth is reduced this year to 7-8 percent instead of the 10-11 percent it has registered in recent years, "that's not bad," he said.
Others painted a bleak picture for the United States.
Nouriel Roubini, chairman of New York-based Roubini Global Economics, said it was no longer a case of America sneezing and the rest of the world catching a cold, because "in this case the U.S. is going to have a protracted case of pneumonia."
"It's not about a soft landing or a hard landing," he said, but "rather how hard a landing it will be."
Still, some were more upbeat in the wake of the U.S. Federal Reserve Bank's decision to cut its benchmark refinancing rate to 3.5 percent from 4.25 percent.
"The United States economy will correct itself," said David O'Reilly, chairman and CEO of Chevron Corp. "I'm an optimist when it comes to the length of what may be a slowdown or a mild recession. ... the outlook is still pretty good."
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