Davos, Janaury 26:

A lengthy list of policy headaches ranging from Iran’s nuclear threat to the stalled global trade talks greeted more than 2,000 business, government and civil society leaders as they gathered in the Swiss ski resort of Davos for the annual meeting of the World Economic Forum (WEF).

Faced with a cocktail of problems that would have spelled political and economic chaos a generation ago, sharp divisions were evident from the outset between pessimists convinced the world is living on borrowed time and optimists who argued that the doomsters are ignoring signs of hope. Jim O’Neill, head of global economic research at Goldman Sachs, professed himself to be “quite cheerful and getting more optimistic”. The world economy was on course to enjoy the best three years of growth since the second world war and there was evidence that China was forcing countries like Japan, India and Germany to embra-ce much needed reforms.

With Germany’s chancellor, Angela Merkel, opening the WEF last night, O’Neill said Europe’s biggest economy was, at last, turning the corner. “A bit of a mini-revolution has been going on in Germany.” A different insight came from Stephen Roach, for years the most bearish of Wall Street analysts, on the US economy. Roach, the chief economist at Morgan Stanley said policymakers had developed “a dangerous degree of complacency”, assuming that an unbalanced world economy could continue.

Roach said Asian central banks had helped to keep the show on the road for longer than could have been expected, but that with the Fed chairman due to be replaced tougher times were coming.