Tepid optimism and gnawing concerns. This is the state of mind of a number of global business leaders and policy-makers gathering at this ski resort for the annual World Economic Forum meeting of the rich and powerful.
While noting that a recovery is slowly underway, they remain concerned about Europe's struggling economy, a spendthrift United States and a burgeoning Chinese economy. But most of all, what concerns many of them is the possibility of the dollar crashing. All these factors, they say, darkens the global economic outlook and could upset recovery in 2004.
"I am optimistic but I am worried. I am concerned," said Stephan Newhouse, president of investment banking giant Morgan Stanley USA.
For several years, the United States has driven recovery world-wide. "That is not sustainable. That is a big question for me," he said.
If the United States stumbles, the global engine sputters.
The global economy is expected to expand by 3.5 percent in 2004 - its fastest pace in several years, according to United Nations' forecasts. But it is very lopsided.
The United States is sucking in imports from all over the world, driving up the US current account deficit as Americans borrow heavily. This, combined with the huge US budget deficit, is forcing down the value of the US dollar in currency markets. The euro is bearing the brunt of the dollar's fall, rising 20 percent last year.
Meanwhile, Asian countries, especially Japan and China, are keeping their currencies artificially weak to compete in global export markets, fuelling concerns of a dollar crash.
Europe already is feeling the pain, said French Finance Minister Francis Mer.
"The value of the currency for some corporations presently starts to be endangering the potential growth of results. It is a fact," Mer told Reuters.
Mutual fund companies are worried too. "What do I say to investors with their assets, their savings, in US dollars? How can they protect themselves?" said Prakash Hinduja, European president of Hinduja Group of Companies, a financial services company with clients in India, Germany and Switzerland.
It's a question of how to get more balanced global growth - a challenge that confronts finance ministers and central bankers from the Group of Seven rich nations when they meet in Florida in two weeks.
Deputy German Finance Minister Caio Koch-Weser told Reuters these issues are firmly on the G7 agenda. "Clearly the euro should not bear the burden of external imbalances," he said.
But finding a solution is far more complex than in the 1980s, when G7 finance ministers engineered an end to dollar declines.
"We have new players who increasingly play a role here - China and its links with east Asian economies," said Koch-Weser.
China does not attend G7 meetings, but is essential to the solution. Its currency is pegged to the US dollar, and both the United States and Europe want the yuan re-valued to take some of the pressure off the euro and to stop undermining US manufacturing.
But Zhu Min, general manager and adviser to the president of the Bank of China, told Reuters not to expect a shock therapy revaluation any time soon. China might adopt a narrow currency band of 0.3-2.5 percent, he said, but gave no time frame.
This adds up to no big solutions at the G7 meeting, said Alan Blinder, former US Federal Reserve vice president and economics professor at Princeton University. In a US presidential election year, the US economy benefits from a weak dollar, so major changes in US policy are not expected.
"It is going to be difficult" and dangers are mounting for the world economy, Blinder said.
But he expects slow reforms to avert crisis: Europe loosening its regulations to make labour and products more competitive and boosting domestic demand; China slowly opening up its economy; the United States after the election to start taming its massive deficits.
"If you are content with snail's pace, then changing is moving ahead already, very slowly at a slow burn," he said.
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