DAVOS, Switzerland: Poverty and unemployment reared their heads at the World Economic Forum Thursday, with speakers urging the elite audience to bridge a growing gap between booming multinationals and the jobless poor. Greek Prime Minister George Papandreou said the global crisis had led to an “unsustainable” race to the bottom in labor standards and social protection in developed nations. Maurice Levy, chairman and chief executive of French advertising giant Publicis, said there was “a huge suspicion about CEOs, bankers, corporations”. “People do not understand that these large corporations are doing extremely well, while their lives have not improved and without the support of the people, there is no way we will be able to grow,” he told a panel discussion. “We have been led by greed. We have been led by only the bottom line, the profit and we have sacrificed the workers in order to please the stockholders.” The increasing division between fast-growing emerging market economies and stagnating, jobless nations in the developed world has been a theme at the talks in Davos this year, which some corporations pay tens of thousands of dollars to attend. Corporate chieftains have preferred to focus on their optimism that roaring growth in countries such as China and India will outweigh flat or declining sales in Europe or Japan, allowing them to keep growing profits. Financial executives attending the Davos forum voiced cautious optimism that the euro zone's debt crisis would be resolved without contagion spreading to Spain or investors being forced to take unbearable losses. A year after the Greek fiscal crisis dominated Davos, leading to bailouts for Greece in May and Ireland in December, business leaders say expectations are growing that the EU is readying effective action to help weaker members of the single currency area and restore confidence in the financial sector. "I think Europe did the only good choice, which is to get through this crisis, because if you don't fix it here, you're going to fix it there, which is in the banking system," JP Morgan Chase (JPM.N) Chief Executive Jamie Dimon said. He said it would be far too risky for any country in the euro zone to restructure its debt, citing the weakness of the financial sector and the risk of triggering unpredictable capital flight and a banking crisis. European insurance executives said private bondholders might be asked to take some write-down, known as a haircut, on some southern euro zone countries' debt in the next few years but it would not cause severe problems for their business. "We're positive the euro will continue to exist as a currency and the euro zone countries will work out their problems overall," Dieter Wemmer, chief financial officer of insurer Zurich Financial said. French President Nicolas Sarkozy passionately defended the euro against skeptics at the World Economic Forum, saying he and German Chancellor Angela Merkel would never let the currency fail. “To those who would bet against the euro, watch out for your money because we are fully determined to defend the euro,” Sarkozy said in a keynote speech. “Mrs Merkel and I will never – do you hear me, never – let the euro fall.” European Central Bank Jean-Claude Trichet called for a strengthening of the 440 billion euro ($603 billion) European Financial Stability Facility "both in quantity and in quality". The fund should be made as flexible as possible and allowed to buy troubled countries' bonds, he said. The ECB has bought 76.5 billion euros in Greek, Irish and Portuguese bonds since May to stabilize the euro zone bond market, as well as providing cheap liquidity to those countries' banks. But it is looking to exit those emergency policies. Many economists and market analysts say Greece's debt burden is unsustainable and will have to be restructured or rescheduled sooner or later. Athens hotly denies any such intention but is pressing for more time to repay its 110 billion euro EU/IMF rescue package and a lower interest rate. Underlining the global struggle with debt, ratings agency Standard & Poor's cut Japan's long-term sovereign credit ratings to 'AA-' from 'AA' Thursday, saying it expects the country's fiscal deficits to remain high in the next few years. Domenico Siniscalco, CEO of Morgan Stanley Europe and a former Italian finance minister, said policymakers and bankers were working hard to find a solution to the euro zone "and I believe we are going to make it". He said the euro zone rescue fund established to help states in difficult was "the embryo of a European treasury" and the huge demand Monday for its first issue of bail-out bonds for lending on to Ireland showed it had market confidence. Dimon said Germany was right to oppose any mutualization of euro zone countries' debt, but the chief executive of German retailer Metro, Eckhard Cordes, said that even though the idea of common euro zone bonds was not popular in Germany, it was the only alternative to "some countries going belly-up". Martin Sorrell, CEO of WPP, the world's biggest advertising company, said he was struck by the increased faith among economists and executives in the euro zone's ability to overcome its problems. "One thing about Davos is there seems to be a bit of restrained optimism," he said, noting that even skeptics such as US economist Nouriel Roubini – nicknamed Dr. Doom for predicting the credit crisis – were more upbeat on the euro zone.
