Fin24

CEOs laud Obama's dose of austerity

2011-01-26 11:46

Davos - Business leaders in Davos welcomed on Wednesday the austerity steps proposed by US President Barack Obama in his State of the Union speech but some questioned whether they went far enough.

"There was a lot of positive movement around competitiveness, focusing on taxes, focusing on trade, focusing on the tone of the discussion and I think there is a real focus on austerity," Ernst and Young CEO Jim Turley told Reuters Insider.

But Martin Sorrell, CEO of WPP , the world's largest advertising group, was less convinced.

"American corporates and Western corporates are really uncertain and I don't think last night's speech really gets us further in terms of removing that uncertainty," Sorrell told a panel on the opening day of the World Economic Forum.

Obama, in a speech on Tuesday night seen as signalling a move to the political centre, offered corporate tax cuts and a five-year freeze in some domestic spending, which he said would cut $400bn from budget deficits over a decade.

The dire state of government finances around the world is seen as a key threat to economic recovery for business leaders and policymakers meeting this week at the annual meeting in Davos, even as CEO confidence rebounds.

John Studzinski, senior managing director of US private equity company Blackstone, told Reuters Insider in Davos that "the devil is in the details" of Obama's words.

"Innovation is very important. We have to look at American workers," he said. "The debate on spending and spending freeze is predicated on the fact that it's been difficult."

Nouriel Roubini, economics professor Stern School of Business - known as "Dr Doom" for his pessimistic forecasts - was sceptical about Obama's speech.

"Even what the president proposed last night in the State of the Union is not going to go in the direction of significantly reducing the budget deficit," he told a panel.