Europe Economy

World Leaders Take Austerity Debate to Lap of Luxury

The site of the Villa d’Este on the shores of Lake Como has been the home of medieval nuns, Jesuit priests, and Caroline of Brunswick, the scandalous Princess of Wales.

Lake Como, Italy
Robert Everts | Stone | Getty Images

Count Domenico Pino, the former Napoleonic general who used to reside here, spent much of his time in a fake fortress constructed in the hillside, working how to fend off imaginary enemies. For the delegates gathered here two centuries later, the dangers gathering are much more real.

This weekend, the Villa is filled with famous faces from the contemporary political, economic and business scenes as the site of the Ambrosetti Forum, as well as hundreds of hangers-on, journalists, policemen and security guards.

Described by those in the know as "what Davos was like 20 years ago", this is an opportunity for leading politicians, policy makers and economists to gather in a quieter, less frantic meeting place than the World Economic Forum meeting.

They’re not just here for the 20 euro ($28.50) gin and tonics, the wonderful views of the lake, the walk up the famous nymphaeum or the chance to spot George Clooney’s abode through their binoculars.

This has been a momentous year for the economy around the world, and in Europe in particular.

Europe has come into increasing focus in recent weeks, with some even questioning whether the single currency can survive this crisis.

In Italy itself, the foundations of the economy, the eurozone’s third largest, look shakier than they have for decades. The government is attempting to push through austerity measures amid concerns that its debt levels could make it vulnerable to the debt crisis in other European countries.

Yet there are much weightier items on the agenda for discussion at Ambrosetti.

As they stroll around the 25 acre park surrounding one of the world’s best hotels, the great and the good, including Shimon Peres, President of Israel, Jose Maria Aznar, former Prime Minister of Spain, Zhu Min, Deputy Managing Director of the IMF and Giulio Tremonti, Italy’s under-fire Minister for the Economy and Finance, are discussing economic and political problems around the world.

Scheduled sessions include the economic outlook for the world, the interaction between the US economy and the rest of the world, the future of the euro, the implications of the changes in Mediterranean economies, and how scientific developments are affecting business.

Between the official discussions, which operate under so-called Chatham House rules (so are not on the record), the main problem vexing the leading lights gathered here is how the developed world is going to emerge from the current economic storm.

There is huge concern that there is a lack of confidence in policy decisions and that too many politicians in the developed world are "followers but not leaders."

One opinion voiced to CNBC is that while the governments of the developed world are dealing sufficiently with crises at the national level, super-national decision making needs to be better.

Several of the delegates express concerns privately that big corporations are no longer eager to invest in the developed world, and that this will hamper economic growth even further in coming years.

While there is some criticism of the governments of the smaller euro zone economies over the scale of the debt crisis, some argue that the “original sin” lay with France and Germany, and that the region's two biggest economies will have to sort the mess out.