World business leaders warn of more financial pain 

The Associated Press 
Saturday, November 8, 2008 
DUBAI, United Arab Emirates: Business leaders gathered in Dubai on Saturday 
warned the world to brace for even more painful economic times ahead, but said 
the victory of U.S. President-elect Barack Obama offers hope for fresh 
leadership at a crucial time for the global economy.

The financial crisis that began with bad U.S. home loans is now moving from the 
banking sector into wide swaths of the global economy — costing millions of 
jobs, forcing working families to cut back and driving once-mighty companies 
into bankruptcy.

The U.S. government said Friday the country's unemployment rate shot to 6.5 
percent, its highest level in 14 years. Jobless rates are rising elsewhere too: 
The U.N. labor agency said last month that world unemployment will hit 210 
million people by the end of next year, its highest rate in the past decade.

How deeply the global downturn will cut remains uncertain, participants at a 
regional meeting of the World Economic Forum in Dubai said Saturday. While they 
called for calm, they also acknowledged there is cause for concern.

"We will be telling our children and our grandchildren about this crisis," said 
Mohamed El-Erian, co-chief executive of Pacific Investment Management Co., the 
Newport Beach, Calif.-based investment firm better known as PIMCO. "You cannot 
turn off the fuel of this crisis easily."

Consumers in the U.S., for example, are facing the triple whammy of tougher 
access to credit, rising joblessness and falling home and investment values, 
El-Erian said.

Cleaning up the fallout will take both time and sacrifice, participants here 

"It's going to be really tough," El-Erian said. "You now have to save even more 
for retirement. This is a tough time, and it's important that expectations be 
formulated accordingly."

The need to recalibrate spending and expectations was a theme sounded by others 
as well.

Howard Davies, director of the London School of Economics and Political 
Science, said residents of countries like the U.S. and the UK have no 
alternative but to increase savings and reduce household debt.

And, he said, homeowners and individual investors need to accept that a big 
chunk of the nest eggs they had amassed on paper is likely gone forever.

"People are going to have to recognize the wealth hit and be prepared to move 
on from that," he said.

The economic slump is not just affecting Western countries.

Soud Ba'alawy, executive chairman of investment firm Dubai Group, said "each 
and every business is going to be challenged." He predicted annual growth in 
the booming Gulf could slow to as low as 2 to 3 percent, from 6 to 8 percent 

Business leaders were hopeful, though, that the future Obama administration 
will bring a renewed willingness by the world's largest single-nation economy 
to work with other countries to fix the global economy.

"You now have a golden opportunity for leadership at a time when leadership is 
needed both domestically and internationally," El-Erian said.


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