World Economic Forum Davos 2012: No big boost to rescue Europe's bailout fund, says Angela Merkel

DAVOS: German Chancellor Angela Merkel expressed determination on Wednesday to solve Europe's debt crisis through greater political unity, but dashed hopes of a big injection of money for the region's bailout fund.

Urging the European Union to act more like a central government for the region, she acknowledged that the countries that share the euro don't have the "political structures" to make the common currency work properly.

She spoke at the opening of the World Economic Forum in Davos, where members of the global business and political elite are looking to Germany to prevent a breakup of the euro, which could hurt the economy worldwide. Many participants said they see increasing evidence that Merkel will do so.

"The message is that we are ready for more commitment. We are no longer making excuses ... That is important because otherwise we will continue to lose credibility," Merkel said.

Merkel did not immediately elaborate on how to overcome the euro shortcomings, but appeared to rule out one solution that some leading figures have called for-a big boost to the euro zone's rescue pot created to help weaker eurozone nations struggling with debts.

"We guarantee the euro, but what we don't want is to promise something we can't hold to," she said.

CRISIS OF CAPITALISM
Meanwhile, leaders of the global business elite were confronted on Wednesday with the fear that the Western model of capitalism has failed and is about to be shoved aside by emerging powers.

"I think we have three to four years in the West to improve the economic model that we have, and if we don't do that soon I think we've lost the game," warned David Rubenstein, managing director of the Carlyle investment fund.

"If we don't do that soon, when we are here in three to four years ... the game will be over for the type of capitalism that many of us have lived through and thought was the best type of capitalism," Rubenstein said. He agreed that state capitalism is a better reliable creator of jobs than laissez-faire.

Global labour leader Sharan Burrow, general secretary of the International Trade Union Confederation, urged corporations and governments to work with workers to develop a new economic model -- and warned of a backlash.

"Let's get a seat at the table for the real economy. Will the real economy please stand up, because the financial markets are killing you," she said. "No-one will like the social unrest that will follow."

But on the same panel, Professor Raghuram Rajan of University of Chicago, warned the 20th century strength of the western economy had already failed to live up to its promises to rich world workers. "Governments made a ton of promises in the 1960s, when growth was very high. We had the welfare state across the industrial world. And then growth started falling off in the 70s, in the 80s," he said.

"Some countries, the UK and the US, tried to revive it through deregulation and managed for a while, but in general growth is too slow in the industrial world relative to the promises we have made," he said.