DAVOS, Switzerland (AFP) - Talk of a US recession dominated the Davos gathering of the world's political and business elite Wednesday, with sharp criticism of the US Federal Reserve but disagreement over the dangers to the global economy.
Faced with turmoil on global stock markets and plummeting confidence, US Secretary of State Condoleezza Rice, a diplomat rather than economic expert by profession, attempted to reassure assembled delegates.
"I know that many are worried by the recent fluctuations in US financial markets, and by concerns about the US economy," she told delegates at the opening ceremony of the World Economic Forum.
"The US economy is resilient, its structure is sound, and its long-term economic fundamentals are healthy," she added.
In recent years the annual meeting in the Swiss ski resort has been held against a backdrop of bumper corporate profits, strong economic growth and tame inflation.
But on the first day of the 38th meeting, debate was distinctly gloomy, with a flurry of downbeat forecasts, warnings and references to recession falling among the snow here.
World stock markets suffered another tumultuous day Wednesday, with Asian exchanges rising sharply, European markets suffering major falls and Wall Street swinging wildly between gains and losses.
In a vote of business leaders and experts held in one session, a lack of international economic policy coordination to deal with the fallout from the subprime crisis was named as the biggest risk to the world economy.
Mismanagement of the crisis was seen as the second-biggest risk, garnering 18.1 percent of votes compared with 18.5 percent for the lack of coordination.
The most significant policy response to the economics ills facing the United States has been a sharp lowering of US interest rates. The Federal Reserve slashed rates by 75 basis points on Tuesday in a surprise move.
It was the first time the Fed had changed interest rates outside its regular rate-setting meetings since 2001, days after the September 11 attacks. It was also its biggest cut since 1984.
Stephen Roach, head of US investment bank Morgan Stanley in Asia, said the Fed's actions were "reckless" and "dangerous" and risked provoking "another (asset price) bubble-induced recovery" which was "the last thing the world and US needs."
Elsewhere, debate centred on the extent to which a US recession would hit global growth, with disagreement about whether a sneezing US would infect the world with a cold.
"The US is not just going to sneeze and have a cold, it is going to have a protracted period of pneumonia," New York University economics professor Nouriel Roubini told delegates in a packed opening debate.
"If the US catches a cold now, maybe the rest of the world gets the sniffles but certainly not pneumonia and I am not even sure the rest of the world gets a cold either," shot back Fred Bergsten, head of the Peterson Institute for International Economics.
And on the frontline of the economy, David O'Reilly, chairman and CEO of US oil group Chevron, agreed: "I subscribe to the view that it is not going to impact the rest of the globe as much as many people suppose it will".
This year's Davos gathering has drawn 27 heads of state or government, 113 cabinet ministers and several hundred corporate titans to the snow-covered and sunny Swiss alps.
Among the presidents expected this year, Pakistan's Pervez Musharraf, on a tour of Europe, was eagerly awaited given the political instability in his country.
Other heads of state expected included Afghanistan's Hamid Karzai, Israel's Shimon Peres, Colombia's Alvaro Uribe, Nigeria's Umaru Yar'Adua and Gloria Arroyo from the Philippines.
British actress Emma Thompson and Irish rock singer/campaigner Bono added a smattering of glamour.
Other issues being tackled were prospects for peace in the Middle East, climate change, terrorism, nuclear proliferation, poverty and disease eradication.
When night falls the rich, powerful and clever can attend sessions on everything from the science of love and "McMuseums," to how much happiness the world can take.
Nightly parties also provide endless opportunities for winding down and schmoozing, with the annual party thrown by Internet darling Google the highlight of the social calendar for many.
Some 1,000 of the world's largest businesses pay 42,500 Swiss francs (26,300 euros, 38,700 dollars) apiece for annual membership to the Davos club -- not counting the extra 11,000 euros per person to attend the meeting.
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