Eurozone meltdown ‘cannot be discarded’ in dangerous mix of global risks, warns World Economic Forum

Fagile economies and extreme weather have cranked up the global risk dial, says the WEF Global Risks 2013 report.

A dangerous mix of fragile economies and extreme weather has increased global risks, with a meltdown in the eurozone still a threat, the World Economic Forum said.

In its Global Risks 2013 report, the WEF said eurozone instability will weigh on world prospects in coming year and the threat of “systemic financial failure cannot be completely discarded”.

The report warned that anti-austerity protests across the eurozone and the election of “rejectionist” governments this year could bring the crisis to a head, “potentially destabilising the global financial system”.

As the report came out, European Union data showed theunemployment rate across the troubled eurozone rose to a record 11.8pc in November, with those out of work now nudging 19m and youth unemployment at 24.4pc.

The survey of more than 1,000 experts and industry leaders fears that persistent global economic fragility is diverting attention of governments from longer-term solutions by limiting resources and investment.

Its more pessimistic outlook “reflects a loss of confidence in leadership from governments”, said Lee Howell, the WEF managing director responsible for the report.

The 80-page analysis of 50 risks for the next 10 years comes ahead of the WEF’s annual meeting in the Swiss ski resort of Davos from January 23 to 27, which brings political, business and financial leaders together to consider the planet’s future.

Respondents said the world was more at risk as persistent economic weakness sapped our ability to tackle environmental challenges.

It also highlighted a widening gap between rich and poor and unsustainable government debt as the top two most prevalent risks – as they were last January.

Following a year of extreme weather – from Superstorm Sandy and floods in China to droughts – rising greenhouse gas emissions were rated as the third most likely global risk overall, while the failure of climate change adaptation is seen as the environmental risk with the most knock-on effects for the next decade.

The report was published as Australia battled with wildfires amid arecord-breaking heatwave.

“These global risks are essentially a health warning regarding our most critical systems,” said Mr Howell said. “National resilience to global risks needs to be a priority so that critical systems continue to function despite a major disturbance.”

Axel Lehmann, chief risk officer at Zurich Insurance, said: “With the growing cost of events like Superstorm Sandy, huge threats to island nations and coastal communities, and no resolution to greenhouse gas emissions, the writing is on the wall. It is time to act.”

This year’s Davos meeting takes as its theme “resilient dynamism”, in recognition of the need for governments and businesses to develop strategies to ensure critical systems continue to function in the face of such threats.

Courtesy: The Telegraph