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Optimism at Davos

January 25, 2014

Global financial leaders have expressed cautious optimism at the World Economic Forum in Davos. But the IMF has warned that deflation and the tapering of Federal Reserve stimulus posed new risks to the global economy.

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German Finance Minister Wolfgang Schäuble 24.01.2014
Image: Reuters

Finance ministers and central bankers pointed to higher growth in the European Union, the United States and Japan as cause for optimism, as they wrapped up the annual World Economic Forum in Davos, Switzerland, on Saturday.

"We have to be mindful of downside risks, but I think we can be cautiously optimistic about the global economic outlook," Bank of Japan Governor Haruhiko Kuroda said, pointing to projected growth in the United States of over 3 percent.

Meanwhile, German Finance Minister Wolfgang Schäuble (pictured) told the forum's participants that the eurozone was stabilizing.

"The eurozone is no loner the center of all the concerns of the world economy," Schäuble said, adding that the countries that had been bailed out were doing better.

"Ireland did very well. Portugal is doing very well. Spain did extremely well. Greece did much better than anyone thought it would two years ago, to be very frank," Schäuble continued.

International Monetary Fund chief Christine Lagarde warned, however, that the global economy still faced risks. She said that the US Federal Reserve's decision to start winding down its stimulus program could have spillover effects on other countries.

Lagarde also said there was a risk of deflation in Europe, where prices and wages could fall, hurting both consumers and businesses.

Japan emerged from over a decade of deflation last year, after Prime Minister Shinzo Abe implemented a controversial program of government spending and monetary easing.

slk/mkg (AP, AFP, dpa)