“Britain still has a high Budget deficit and we have a credible deficit
reduction plan,” the Chancellor said. “It is a credible and flexible plan.It
would be wrong to put it at risk.”

The assembled audience were all looking at the Chancellor’s body language,
given that he will already have seen the Q4 GDP figure – predicted to be
pretty grim – which is made public tomorrow morning.

Would he be slumped over, burdened with the horror of a flat economy? Or
would he be skipping for joy, safe in the knowledge of slightly better than
expected figure?

Neither, of course – secrets are secrets after all. But, I would say
Osborne was pretty upbeat. He went through how he wanted to make a positive
case for Britain’s place in a reformed EU, that he wanted to make the UK the
most competitive place in the West to do business, that anti-business
rhetoric had no place in Government and it was no time “to beat up on profit
making or corporate success”.

That positive pro-business tone will be welcomed by many here.

15.36 The Telegraph’s Emma Rowley in Davos, for her first time, has
observed that the main area gets very busy in the afternoons. Shouldn’t they
be in sessions?

Where the magic happens – the main hub gets very busy in the afternoon. I
spotted some people taking to the floor due to the lack of seats.

15.25 A very cold-looking Boris has done an interview with Bloomberg
and says that while the subject of Britain’s membership of the EU
is not a priority at the moment, the issue has been around for so long, that “boil
could be lanced would a referendum”.

QuoteIt’s not the number one issue for people but it has been going on for a
long time and it is debilitating and unnecessary.

The boil could be lanced would a referendum.

Boris says he agrees with Cameron’s speech and when the time comes for the
British people to vote, he thinks they will vote to stay in the EU.

QuoteI think [Cameron’s speech] was bang on the money.

What he was saying there is to our friends and partner, is that loads of
other countries have had referendums on their membership of Europe, why
can’t we have one?

I think there are a lot of them who secretly think, if we can nail this
thing and give the Brits what they want more or less and they vote to stay
in that will be a very good thing for Europe, because that whole sense of
Brits being whingy and backmarkers and bickering, that would be over.

My overwhelming instinct is that we can get sufficient reforms to the
treaty to make it sensible for most people in my country to vote for the
single market.

15.02 Boris Johnson is in Davos for the WEF. Sky’s Ed Conway had a
quick work and Boris seems to be having a great time.

Ed also makes an interesting point about press conferences in Davos

14.51 Osborne says he is “sceptical” of the ever closer union
that Britian was once asked to be a part to, in reference to the eurozone
and argues that EU member states can have flexibility.

QuoteWe don’t want to be part of it because we’re not tied to their currency.

You can have a European Union of flexible member states, working together,
cooropate more closely on different issues.

For example, Britain works more closely with the French on defence [with
mention of Mali], while the French work more closely with the German on
their shared currency.

14.40 Osborne now goes on to talk about Britain’s place in the European
Union, following Cameron’s speech, and is very clear that he wants Britain
to stay in Europe, but in a “reformed Europe”.

QuoteWe can make this continent a success but it has to be changed.

I’m arguing for reforming Europe and Britian being part of a reformed

Britain is a European country. But we want the instiutions to work for our
economy, and for all European economies.

14.29 Osborne has obviously been looking very hard at the IMF’s
decision to cut the UK’s growth forecast for this year and next, and has
found himself a little silver lining.

QuoteThe forecast is to grow and I note that we are forecast to grow more than
Germany or France.

14.20 Osborne is asked if there is more pain to come and how long will
it last.

QuoteWe have still got many of diffcutl decisions to make, but I think we’re
heading in the right driestion.

But in terms of progress, rebalancing Is happening, and jobs are being

14.12 Osborne rejects creating a Plan B.

When asked about the comments made by chief economist at the IMF Olivier
Blanchard that Britain should ease off on its austerity measures (see
08.27), he says his current plan is flexible enough.

QuoteWe have legislated reforms and put in place what I think is a credible
reduction plan and it is flexible.

For example, before christmas I made it clear that we would extend our
budget deficit reduction target by two year.

Osborne goes on to say that the UK has built up credibility which allows him
to borrow money from markets at the lowest rate “perhaps of any
chancellor before me”.

QuoteWe have credibility. That is very hard won and easily lost and it would be
a mistake to put that at risk.

14.05 Osborne says the referendum is a way of connecting the people
with the European institutions.

QuoteWe think one of the issues in Europe is the detachment of the people from
institutions and the referendum is a way of addressing that.

What I want to do at the time of the referendum is make the argument for
Britain being in Europe; in a reformed and competitive Europe.

14.00 Chancellor George Osborne is talking at the moment, in a much
cosier setting than we have seen in the main conference call. You
can watch it live here.

13.53 The Telegraph’s economics editor Philip Aldrick has
been picking the brains of the Davos delegates in between sessions. He found
a keen supporter of the UK on his walks:

Steve Schwarzman, founder of private equity group Blackstone, has some
cheery comments to slay Britain’s Cassandra’s. “We like the UK,” he told me
in the corridors of the World Economic Forum’s annual conference in Davos.

“We have been a consistent buyer of commercial property in the UK and we
think long-term the country has good prospects. It’a a pro-business
environment. The rule of law is terrific.”

Will the in-out referendum on Europe unsettle his investment intentions in
the UK, though? “I’m not a foreign policy guy ….”

13.45 Klaus Schwab ask the German Chancellor, in reference to Cameron’s
speech, that if the euro is to become the link for interior strengthening,
what is this going to do for those that are not a part of the eurozone?

QuoteOne should not forget that the euro was created with the expectation that
all EU members would become members of the eurozone.

The British Prime Minister said something yet again that we have heard
often, that the UK can not envisage being a member of the eurozone, and the
same with the Danish and the Swedish people have decided against joining the
common currency.

What we need now is all forms of enhanced cooperation, enhanced
coordination, which needs to be exploited and shaped in such a way that it
is binding for eurozone members but also freely accessible for those who
haven’t introduced the single curreny.

It’s not a closed shop. It’s open to everyone.

It would appear that Merkel has been quite supportive of Cameron’s speech, as
Louise Armitstead notes on Twitter.

Angela Merkel and Klaus Schwab making their way to the stage at the WEF

13.32 Moving on to the role of central banks, Merkel says “central
banks should not be the ones who sweep up after politicians have created the
big mess”.

QuoteThe situation we had of the crash in 2007/2008, it was obviously important
for central banks to step in and help in such a difficult situation and the
European Central Bank did that.

It exploited the limits of its mandate, which is more limited than that of
the US Federal Reserve.

She adds that the ECB’s role is to ensure the stability of the single currency
and does not take into account figures such as unemployment, as the US Fed

QuoteThe ECB provided liquidity assistance to banks, it is an emergency
assitance where the ECB steps in with great resolve.

But in the end central banks will not be able to gloss over macro issues.

That is why the ECB will only continue buying the bonds of a country, if
that country continues its measures.

13.25 Merkel also notes that Cameron spoke of the Union’s
competitivenes and speaks of the need for free trade agreements.

QuoteA big driver of growth for us is free trade. We have unfortunately a lot
of protectionist tendencies.

We need to pin our hopes on bilateral trade agreements.

13.20 Merkel has continued with the topic of the EU’s competitiveness,
which has been brought up by every EU leader who has taken the stage today.

QuoteOver the next few years to come, we will have a conversion in
competitiveness in common euro area.

Not just to be the most common denominator, but competitive to measure
against the best on the global market.

Because EU member states can only grow when they produce goods that can be
sold on the international market place.

13.15 Angela Merkel is now talking. You
can listen live here.

13.09 German Chancellor Angela Merkel is next to take the stage at the
WEF in Davos and the crowd waiting to get in to the conference hall are
patiently waiting for the doors to open. Louise Armitstead will be covering
the session. She reports:

Crowd waiting for the next big event: Angela Merkel’s speech at Davos. As
more commentators are pointing out, the German Chancellor would agree with
David Cameron on large parts of his analysis of Europe’s economic problems
and his demands for reform – but clearly needs to take a stand against UK
threat to EU unity.

As the face of Brusselsdrive for austerity, she is under pressure prove the
strategy is still worth the cost, particularly the eurozone’s soaring
unemployment. Crucially she needs to be seen to be leading on growth too.

She’s due to start speaking at 1:15pm UK time.

13.00 The Telegraph’s Ambrose Evans-Pritchard has done a blog
looking at Cameron’s commitment to hold a referendum on Britain’s EU
membership in the first half of the next parliament.

argues that the referendum may never be necessary.

David Cameron’s pledge for an ‘in-or-out’ referendum on Europe will be
overtaken by internal events long before we reach 2017. The vote may never
be necessary. He is entirely right to play for time.

The eurozone’s North-South misalignment has not been resolved. The Club Med
bloc is still sliding into deeper depression. The financial crisis — never
more than a symptom — has graduated into a more intractable economic,
social, and therefore political crisis.

The ECB’s Mario Draghi has taken the risk of a sovereign default in Spain
and Italy off the table, but he has not restored these countries to economic
viability within a D-Mark currency bloc, and nor can he.

12.48 Henry Kissinger, former US Secretary of State, was
speaking in one of the first session in Davos this morning. He called on
America and Russia to cooperate in defining joint objectives to solve the
tragedy emerging in Syria.

He advocated “an American-Russian understanding as a first step towards
defining what the objective is”, adding that “the Syrian problem would best
be dealt with internationally by Russia and America not making it a contest
of national interest”.

The Syrian conflict, initially seen as a fight of democracy against
dictatorship, has transformed into a conflict between various ethnic groups,
leaving the international community with a dilemma: “

QuoteThe outside world finds that if it intervenes militarily, it will be in
the middle of a vast ethnic conflict; and if it doesn’t intervene
militarily, it will be caught in a humanitarian tragedy

While a number of outcomes are possible – Assad staying in office, a total
Sunni victory, or an emergence of a loose federation of various ethnic
groups – what is clear is that “the more the outside world competes, the
worse it gets,” concluded Kissinger.

12.35 In yesterday’s
blog (see 10.12)
, the Telegraph’s Louise Armitstead revealed that
WEF had provided crampons to everyone to attach to their shoes so they could
walk between venues, safely.

The crampons even have a small reflector strip on the back adding an extra
element of safety for night-time odysseys.

But for those who don’t want to walk, they can grab a buggie – which Louise
says are driven at “extreme pace”, as Louise found out and kindly
filmed for us all to share.

Hold on tight.

12.20 Labour peer Lord Malloch-Brown, Lord Mark Malloch-Brown, a former
foreign office minister, is in Davos for the WEF and notes that the most
talked about speech at Davos this year was not even given at Davos.

QuoteMuch muttering in the corridors and some indignant explosions to
journalists. But many Europeans with a more courteous political culture than
Britain’s just bit their tongues in public for fear of making things worse.

He has observed that business men and women actually appear less concerned
about a UK exit from the UK than the politicians.

QuoteIf our research is right outrage in political and policy circles may
actually not be matched among business participants.

And indeed casual exchanges at the FTI Consulting party last night tended
to confirm our surprising poll discovery that Europe’s reputation has been
so shop soiled by the chaotic Euro drama that many businessmen would welcome
a Hong Kong type solution for Britain: one Europe, two systems.

This would allow them a sane rule of law more lightly regulated place to
continue to do business into Europe from so avoiding the regulatory
nightmare and financial turbulence of the continent proper.

12.00 More reaction to Cameron’s speech today at the WEF, this time
Barbara Stocking, Oxfam’s chief executive.

I am delighted the Prime Minister made such a strong moral case against tax
avoidance in both the UK and developing countries. There can be no moral
justification for companies wriggling out of paying their fair share to
society .

Every pound of tax companies avoid paying to poor countries is one pound
lost to the fight against hunger. The fact that tax dodging costs poor
countries $160bn-a-year while one in eight people in the world do not have
enough to eat is nothing short of a scandal.

Oxfam and the 100 charities that yesterday launched the If campaign will be
putting pressure on David Cameron and other G8 leaders to turn his rhetoric
into reality.

11.45 Emma Rowley was in a session this morning where leading
Chinese economist Li Daoku
said the West
was misreading the risks in China
. She reports:

Mr Daokui, formerly a policy-maker at China’s central bank, said he does
not worry “at all” about the economy’s slowdown from a once double-digit
growth rate and is confident that GDP will expand “reasonably fast” during
this decade.

“The reason I do not worry about GDP growth per se if the country is …
still a very poor country,” he said, citing the GDP per capita measure,
which is less than one fifth that of the US.

Mr Daokui, speaking at the 2013 World Economic Forum in Davos, also thought
issues around China’s currency policies and its exporting might, long a
sorce of tension with net importers such as the US, were lessening.

The long-term trend is for China’s trade surplus to decline, he said, while
the country sees “a quiet revolution going on” as domestic demand rises,
driven by consumers.

However, he was concerned as to how relationships with other countries will
unfold, and the issues facing the world’s biggest economy, the US.

11.29 Time to catch up on what has been happening outside of the main
conference hall at Davos.

The Sunday Telegraph’s business editor Kamal Ahmed was at a breakfast
this morning, where, Sir Martin Sorrell spoke about the key
challenges facing WPP and how he has changed the structure of the business
using Google’s “five legs to a stool” approach.

Here he is speaking about it:

Martin Sorrell on WPP and leadership at Davos by KamalAhmed

11.18 Ireland’s Enda Kenny seemingly dodges the question about
Cameron’s speech.

QuoteFive years is an eternity in politics.

Given the relative calmness at the moment, we have to use this as an
opportunity to move on, to make changes, have an impact on economies and job
prospects for millions of people, which is essentially what politics is
about here.

When Lionel Barber, editor of the FT who is chairing the session, asks if
Kenny agrees with Monti that Britain is asking the right question, he simply

QuoteThat’s up for the British government to decide.

11.10 Mario Monti is also speaking in support of Cameron’s speech.,
more specifically the wording of the question that will be put to the
British people in the referendm.

QuoteThere is only one way to ask the question without hijacking the other [EU

At least it is a clear cut question without paralysing others.

I believe that when the moment comes, the UK people will say yes.

10.54 Dutch PM Mark Rutte has been speaking further about his support
for parts of Cameron’s EU speech that he made yesterday.

QuoteI agree with David’s comments yesterday in terms of making the EU more
efficient. We should look at the running costs of the Union.

I also like the part where he spoke of competitiveness, getting the engines
going, getting more jobs and it is vital for us as the European Union and
for the UK that it stays part of the EU.

The UK out of the EU would just be an island somewhere in the Atlantic,
floating between Europe and the US but not connected between these two.

I think it is vital for us all that the UK stays in.

10.42 In Cameron’s speech he said that an EU and US trade had “immense
potential” and the conversation has continued into the next session,
looking at the eurozone.

Italian PM Mario Monti says the trade deal is “crucial and
possible but important adjustments need to be made on both sides of the
Atlantic, but I think it will be done”.

Ireland’s PM Enda Kenny, agrees and says the deal will not be agreed
this year and “probably not next year”.

QuoteBut there is a signal that the greatest trading bloc on earth, which is
the EU, and the US can set out the roadmap of how this will happen.

We need more focus ourselves.

At end of the day its always about jobs jobs jobs and that means injecting
growth into European economies and creating jobs and giving youth jobs and
showing them that politics does actually work.

Irish Prime Minister, Enda Kenny (L), and Irish Finance Minister, Michael
Noonan (R), are seen ringing the opening bell in Davos.

10.35 Dutch Prime Minister is speaking in the next session now –
Eurozone Crisis: The Way Forward. He says Europe “needs” the UK to
stay in the European Union.

10.25 Louise has also been getting reaction to Cameron’s speech from
others in the conference hall at Davos:

10.18 The Telegraph’s Louise Armitstead was in the conference
hall for Cameron’s speech and has a few observations:

Henry Kissinger‘s warm up for Cameron: “The ingenuity that
brought the economic unity of Europe together should be transferred to
political sphere…. I would include the UK” got a laugh from the
Congress Hall here at Davos, which was packed full.

David got a loaded introduction by Klaus Schwab: “you made a historic
speech yesterday and we are anxious to hear how you see Europe… But we
also welcome you as head if the G8, you called for boldness not just for Uk
but for the whole continent, you said UK was part of Europe not by choice
but by default”.

When Cameron took the stage… he didn’t play to crowd, he started in G8
mode and the threat of terrorist threat and attack on Mali. “We need to
address that poisonous narrative” of terrorism.

10.10 Dave says that’s all the time he has for questions, so Klaus
Schwab comes on to the stage to ask him one more, leading to
louder-than-you-might-think laughs from the conference hall.

Klaus asks about a political union in the Europe. Cameron is very clear in his

QuoteIf you mean that Europe has to become a political union, in that it should
become more like a country called Europe, then I don’t agree.

Countries in Europe have their history, institutions, their own
sovereignty, and to try and shoe horn into a centralised political union
would be a great mistake for Europe and Britain would not be apart of it.

But if you ,mean greater political will, I am all up for it.

I think we need to explain that political will is what matters rather than
more political institutions that people just don’t want to give their
consent for.

Britain is a major European player, we are right out there leading the
arguments, making the arguments, but a centralised political union it’s not
for me, and it’s not for Britain.

10.05 Cameron is asked, that while he champions himself as selling
Britain to businesses, isn’t the referendum going to cause uncertainty?

QuoteI’m very clear that its obvious change is coming in Europe. It is
happening already. The single currency means treaty changes and other
changes. But Britain has a choice…we can step back…or walk towards it,
which is my approach.

Yes Europe has to change to suit the euro but it also has to change to suit
the rest of us as well.

What I’ve been struck by is the business reaction [following my speech].

If you look at the comments from the director-general at the CBI, the
Chamber of Commerce, the Federation of Small Businesses, the 55 business
leaders who have written to The Times today – they say this is a sensible

So yes, all courses of action have their difficulties but I would argue
that it is worse to sit back and do nothing.

Much better is to get in there, shape the debate, lead the debate…then
put that to the British people. Businesses can see that the Conservative
Party has a plan to deal with this issue.

09.58 Question regarding Britain’s position in Europe, asking about
Britain being a net contributor to the EU.

QuoteWe are major net contributors to the Europe Union. But we don’t just
contribute money.

Two of best developments in the EU have been driven partly by the British.

First, the single market, which is tragically still not complete, but
single market has been a British drive. The other thing is the enlargement
of the EU…bringing former communist countries of the east and south.
So think we contribute in terms of idea and brains as well as money.

09.53 Dave is finishing up now before taking questions.

QuoteI am about the most pro-business leader you can find.

We want open economies, low tax and free enterprise. You need to lay down
the rules of the game and be prepared to enforce them. When one companies
doesn’t pay the taxes they own, then one companies ends up paying more.

We have a vision of proper companies, proper taxes, proper rules.

We are going to work with our partners to achieve it for the good of the
people right across the world.

Cameron then puts it to questions and not a single hand goes up, leading him
to remark “that has never happened before” – then the hands go up.

09.50 Dave has moved on to talk about taxes now.

QuoteI am a low tax conservative but I’m not a no-companies should pay tax

Business must pay their fair share.

Companies who think they can sell to Britain and not pay their taxes need
to wake up and smell the coffee because the public who buy from them have
had enough.

Speaking out is not anti-capitalism, or anti-business. If you want to keep
tax rates low you have to keep taxes coming in.

09.46 Dave says trade is a key aim for the G8. He says a free
trade deal between the US and EU could boost EU GDP by €50bn.

09.42 Cameron says he is going to push for more openness in trade.

Europe is being out-competed and out-invested.

09.39 Now he turns to talk about his Europe speech yesterday.

QuoteThis is not about turning our backs on Europe. Quite the opposite.

This is how I see it -just over half of EU countries are in the single
currency. You move towards a banking union, towards a fiscal union and that
has huge implications for those of use not in the euro, like the UK, and we
are frankly not likely to ever join.

It is not just right for Britain, it is right for Europe.

09.35 Today’s speech is going to focus on economic priorities, he says.

QuoteHow do we compete and succeed in global economic race that we are engaged
in today?

A lot of the answers are clear. You have to deal with debts, cut business
taxes and crucially make sure schools and universities are truly world
class. In the UK we have been doing these things.

09.32 Dave’s up. He says it is a privilege to be hosting the next G8
meeting (which will be held in North Ireland).

QuoteUp there on our agenda is tackling the threat of extremism that we have
seen erupt in Mali and that despicable attack in Algeria.

09.30 David Cameron is about to speak. You
can watch it live here.

09.22 The Telegraph’s Louise Armitstead has been in one of the
first sessions where Henry Kissinger, former US Secretary of State, is
speaking. She reports:

Henry Kissinger is in the Congress Hall at Davos, where Cameron is due to
speak next. Dr Kissinger is talking about foreign policy and Obama – ‘He
wasn’t my first choice in the election…”

Re Israel / Palestine ‘I would expect some activism… I would also expect
the Syrian problem will be best dealt by Russia and America not making its
resolution into a political contest.”

09.19 Some key sessions to keep an eye out for today.

All times are GMT.

09.30am: David Cameron, Special Address

10am: Eurozone Crisis – The Way Forward – speakers include Ireland’s
Prime Minister Enda Kenny, Dutch PM Mark Rutte and Italian PM Mario Monti

1.15pm: Angela Merkel, Special Address

1.45pm: George Osborne, An Insight, An Idea

2.45pm: An Insight, An Idea with Joseph Stiglitz

3.30pm: Preventing a lost generation – looking at Europe’s youth

09.13 David Cameron is set to speak at the WEF at 9.30am UK time.

And he will be pleased that he has found support from a fellow EU member
leader, who has also expressed concern about where the EU is heading.

Swedish PM Fredrik Reinfeldt, whose country has also declined to adopt the
euro, said

QuoteIt’s a vital interest that they stay in and I see Cameron’s speech as an
initiative as to how that might happen.

He’s not the first leader to express reservations about where Europe is
heading … We are very close in the view that we need to increase
competition and we need more free-trade agreements with the growing parts of
the world economy.

Without that, we will have a different European Union and therefore we need
the UK inside.

09.07 The Telegraph’s head of Business Damian Reece has just
bumped into a a highly-respected academic who says British schools need to
be doing more to teach the children of today more about China.

I’ve just bumped into John Quelch the highly respected former dean of the
London Business School and Harvard who is now dean of the leading Chinese
business school CEIBS, a joint venture with the EU.

His message is clear. Schools in Europe, including the UK, need to do a lot
more to teach mandarin. Why are schools not hiring some of the tens of
thousands of bright Chinese students at our universities to teach Chinese
studies in our classrooms? He fears the UK teaching unions would get in the
way of such an obvious move.

If we don’t do more to teach our kids Chinese language skills and about
China generally then we are going to lose out big time. The Chinese know a
lot more about the West than the West knows about China as witnessed by the
much greater number of Chinese students studying here than our people
studying over there.

There remains an “ostrich” mentality especially in Europe among
businesses that half hope newspaper stories about instability in China are
true so that Chinese companies don’t do too well before a chief executives

The UK government did well to invite leading Chinese entrepreneurs over to the
UK for the Olympics but has since failed to follow up with them. The likes
of UKTI and the department for business need far more commercially savvy
people on the ground. It’s time they hired on secondment people from the
likes of IBM and Accenture, reckons Quelch.

08.55 The WEF has released a report in Davos entitled “Rebuilding
Europe’s Competitiveness”
. The report shows that EU
competitiveness is falling, the gap between north and south is growing,
while political leadership is vital.

The Telegraph’s Louise Armitstead who was in the session reports:

European competitiveness is dropping and it’s political leaders have still
do not have a credible vision for growth, a report published in Davos today
has concluded.

The report, published by the World Economic Forum and Roland Berger
Strategy Consultants, warns of a “perilous macroeconomic disequilibria
that have plagued Europe and especially the eurozone.”

A lack of innovation and entrepreneurship, a sluggish labour market and
inefficient product and market services are factors dragging on the whole EU
but in the south in particular, the report says.

The report warned that a ‘stark competitiveness gap divides Europe into two
broadly defined gaps: a highly productive, export-orientated North and a
less productive South.”

So far European leaders have been engaged in “short term fire fighting”,
the report said but it urged them to urgently address the gap. If
successful, it would “boost the region’s overall competitiveness and
improve the continent’s economi and financial stability.”

Asked which leader had the best policies to address competitiveness, Bernd
Brunke, an author of the report, said: “Some of the leaders are good on
firefighting but I still thinks are missing the vision… All political
leaders are asked to work on that vision and work towards it.”

You can also follow Louise on Twitter:

08.40 There is more reaction coming out of Davos to David Cameron’s
speech yesterday in which he confirmed that, if re-elected as Prime
Minister, he will hold an in/out referendum on Britain’s membership in the
European Union.

This time the reaction is from former Prime Minister and Labour leader Tony

08.27 The IMF’s chief economist Olivier Blanchard has just been
speaking on BBC Radio 4’s Today programme. He has urged Chancellor George
Osborne to take any route in tackling the country’s deficit and says the
budget in March would be the time to do it.

QuoteWe have never been passionate about austerity. We said fiscal austerity
should be slow and steady based on a medium term plan.

We said that if things look bad at the beginning of 2013 – which they do –
then there should be a reassessment of fiscal policy.

You have a budget coming in March so it is a good time to take stock.

We think that slower fiscal consolidation in some form may be more
appropriate [for the UK].

In October, Mr Blanchard claimed in an IMF report that austerity had hurt
wealthy countries such as the UK far more than most analysts had expected.

08.15 The first two sessions of the day have just got under way
in Davos – Scaling Social Innovation and An Insight, An idea with Li Daokui. You
can watch both sessions live here.

08.10 So, the International
Monetary Fund cut its forecast for the UK
over the next two years
yesterday but it was not all doom and gloom. Christine Lagarde, managing
director of the IMF spoke at the WEF late last night struck a note of
optimism. Emma Rowley reports from Davos.

The eurozone is improving – and the UK is still along for the journey as
Europe continues to integrate, according to Christine Lagarde, head of the
International Monetary Fund.

The managing director of the global lender and watchdog struck a note of
optimism on the region as she addressed the World Economic Forum’s annual
meeting in Davos.

“If you look behind the daily headlines … you see a region in a process of
integration, UK included,” she said. “Yes, of course, the European economy
faces many challenges, many issues that have to be addressed.

“But destiny comes through the smoke and the fog and I, for one, am
optimistic about Europe’s future.

“The governments have actually changed the picture, as shown by [bond]
spreads and yields.”

07.55 David Cameron and George Osborne arrived in the Swiss resort last
night. Both men will be speaking at the WEF later today. The Sunday
Telegraph’s Business Editor Kamal Ahmed gives us an idea of what to expect

Today is Politicians Day at Davos, like Ladies Day at Ascot but with fewer

David Cameron flew in last night with George Osborne, both relatively flush
from the largely positive response to the Prime Minister’s speech on Europe.

Cameron involved Osborne closely in the project, the two political allies
working together to get the “We’re ok with the EU, but only on our terms”
tone correct. Business reaction, as we reveal this morning, is mixed.

Some like Sir Martin Sorrell fear break-up. But others, like CP Gurnani,
the chief executive of Mahindra Satyam, one of India’s largest companies
with UK interests, says it matters less than issues such as employment
rights and business taxes. I am sure the Conservatives will leap on that.

Both Cameron and Osborne will be speaking later today – the Prime Minister
in conversation with Klaus Schwab, the founder of the World Economic Forum,
and the Chancellor at An Insight, An Idea session.

I saw one of the An Insight, An Idea sessions yesterday with Sir Martin and
despite the slightly cringing title, they were a good one-on-one forum aimed
at getting a little more out of the interviewee. Osborne is an arch
political strategist and will be preparing this morning to say just exactly
what he wants to say – and no more. I am sure Europe will again dominate,
although tomorrow’s GDP figures are starting to loom large.

Cameron will also speak in the early evening here at a session with Bill
Gates, Paul Polman, the chief executive of Unilever, Ban Ki-Moon, the
Secretary General of the United Nations, on development around the world.
Cameron made free trade and Doha a big theme of his appearance here last
year – I wonder how he will view global economics now with allegations of
protectionism laid particularly at the door of America. Has there been as
much progress as Cameron would have liked?

Other political leaders in town include Angela Merkel and Dmitry Medvedev,
the prime minister of Russia who is preparing the world for its leadership
of the G20.

We’ll also be watching out for the Building Cyber Resilience session where
Ian Livingston, the BT chief executive, will lay out some chilling facts on
the number of businesses whose systems are attacked.

As he tells his colleagues: “There are two types of CEO, those that
know their systems are being hacked and those that don’t.”

The Cabinet Office minister, Francis Maude, will also be in town to discuss
with chief executives how to increase their cyber security.

Another politician in Davos is Gordon Brown, the former prime minister. He
will be speaking about infrastructure investment in Africa in particular.

And finally, an intriguing fact reaches me that Nikolas Sarkozy is in town,
appearing as the special guest at the annual Barclays dinner which this year
for the first time was closed to delegates from the media. Sarkozy
apparently didn’t want any pesky hacks spoiling his supper, somewhat to the
irritation of Barclays. Sarkozy is still a little sore over losing the
election, it seems.

07.45 Good morning and welcome to the second day of the live blog of
the World Economic Forum in Davos. Today is politicians day.

Obviously the same team from The Telegraph is still there, just a quick
reminder of who they are.

Damian Reece, head of business

Kamal Ahmed, business editor of the Sunday Telegraph

Jeremy Warner, assistant editor of the Daily Telegraph

Louise Armitstead, chief business correspondent

Philip Aldrick, economics editor

Emma Rowley, business reporter

They will be sending live updates throughout the next few days. You can also
follow all the latest news from Davos by clicking

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