Is the global financial crisis over? Not so fast: oil firm chair

By Dan Perry, AP

CERNOBBIO, Italy — Oil prices are down, the dollar is up, and U.S. growth and exports have perked up a little. So is the global financial crisis winding down anytime soon? Top economists and business leaders meeting at an Italian lakeside resort found plenty to discuss but little to agree on.

Peter Sutherland, chairman of British oil company BP PLC, predicted Friday that global economic conditions will remain difficult for some time — but will eventually recover due to growth in China and the rest of Asia.

Sutherland, who is also chairman of London-based Goldman Sachs International, said equity markets would regain strength over time, but acknowledged it was impossible to tell exactly when that would occur.

“I expect a continued period of difficulty because of lower growth, higher inflation and credit markets — but like everything it will pass,” he told The Associated Press on the sidelines of the Ambrosetti Forum at the Villa d’Este on Italy’s Lake Como.

Few were willing to make predictions on the record Friday, but in private conversations there was a clear sense of optimism that by end of 2009 the bad debt traced largely to the U.S. sub-prime crisis will have worked its way out of the system and that global financial markets will have stabilized.

Jim O’Neill, Goldman Sachs’ head of global economic research, said he believes the credit crisis was largely a problem for the United States — as well as Britain and Spain — and that it amounted to an inevitable correction after years of debt-fueled demand and deficit spending.

“If you’re thinking truly globally, you have to think very differently from what we’ve been brought up on,” he told AP. “The problem is very U.S.-centric… It is conceivable that this is a structural shift and going forward the U.S. will see a very different evolution in its growth.”

O’Neill — widely credited with the fashionable acronym BRIC to signify the rapidly emerging Brazil, Russia, India and China — noted that those economies were performing well and the global economy was expected to grow at almost 4 percent over the next year.

And with economies so interlocked, he argued, those countries should be accorded a more prominent place in global governance, regardless of concerns about democratic credentials — for example by including them in a rejiggered Group of Eight, which currently includes Russia but not the other three.

“If I believed that the Chinese consumer was about to collapse I would have a completely different view,” he added. Others at the off the-record conference expressed skepticism that Chinese consumers could take the place of the Americans anytime soon.

Another issue that occupied delegates was whether the recent rally in the U.S. dollar was just a blip or a new trend that could trouble rising exports which have to date helped stave off recession.