At the end of January, as the world’s richest and most powerful business leaders got together for their annual knees-up in Davos, wildcat strikes erupted across the UK and workers poured onto the streets of Paris to manifest their growing fears. Further to the east in Moscow, Vladimir Putin’s police beat demonstrators about the heads with their truncheons for daring to object to his economic policies.
Kennedy, attending the Economic Forum, could count himself amongst the world’s most privileged individuals. The Irish Netherlands Bank was a new boy amongst the very select one thousand member companies in the organization, all chosen for their role in shaping the future of their respective regions, and quite naturally for the very substantial financial means they had at their disposition.
In spite of the fifty thousand dollar membership fee, the organization went to great pains to point out it was not a rich man’s club, but was dedicated to improving the state of the world, though not all would have agreed.
Michael Fitzwilliams had just one goal in mind when he prompted Kennedy’s visit to Davos. Having learnt of Sergei Tarasov’s intention to participate at the Forum and the presence of Vladimir Putin, the banker wanted to substantiate the precise kind of relationship the oligarch maintained with the Russian Prime Minister.
Kennedy had opted for a scheduled flight to Zurich’s Kloten International Airport. He had not wanted to test Samedan Airport, preferred by certain participants, situated in the Swiss Alps at 1,707 metres altitude, it was one of the highest in Europe and considered difficult by pilots, surrounded by high mountains and subject to unpredictable winds. At Kloten a chauffeur driven Mercedes awaited him for the one and a half hour’s journey to Davos; one hundred and sixty kilometres to the east of Zurich.
Two hours after landing in Zurich, Kennedy checked into at the newly refurbished Steigenberger Belvedere, a Belle Époque style edifice, a monumental hotel built in 1875, just a short walk from the Davos Congress Centre. Kennedy’s suite was unpretentious, acceptably spacious and furnished in a style he had heard described as ‘Deutsch comfort’ ― solid and very conventional, but with a splendid view of the Alps. The suite set the bank back one thousand Swiss francs per night plus tax and service, breakfast excluded.
Politicians and financiers gathered in the highly exclusive Swiss ski resort, in an effort to come to terms with the turmoil that was wreaking havoc on the world economy. They fumbled and bumbled, seeking logical and not so logical explanations. Regretfully, their deblaterations offered little help; what had happened had happened. As Pat Kennedy would have put it: someone had upset the ‘apple tart’. Banks and markets had lost all sense of reality. In the absence of capable politicians and regulatory watch dogs, men of the likes of Fred the Shred had simply been allowed to run wild. The reality was neither politicians nor bankers had been capable of understanding the complexities of the systems they held the responsibility of managing.
Pat found the delegates stuffy and boring and wondered why the media was so interested. On the second evening he was relieved to catch up Sergei Tarasov with the entourage that always attended him. Amongst them were a couple of attractive Russian girls whom he was told were tennis players present for an event in Basel. The suspicion that they had probably never held a racquet other than for a sportswear fashion shoot did not trouble Pat in the least, he always appreciated the refreshing presence of attractive young women. As soon as Vladimir Putin arrived Tarasov was on standby, leaving Pat the agreeable task of looking after of his tennis friends, and practicing his Russian whilst exploring the few places of interest in Davos.
Each leader took his turn on the rostrum, spouting concern and proposing off-the-shelf solutions to the crisis. However, it was Putin who woke-up the delegates and set the press flurrying. To Tarasov’s amusement, he took a vicious swipe at Wall Street, telling the assembly: ‘I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasised the US economy’s fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just twelve months, they have posted losses exceeding the profits they made in the last twenty five years. This example alone reflects the real situation better than any criticism.’
Pointing the finger was a little late. The fact was the roots of the boom and the crash lay to a great degree in interest rates, which during the Greenspan years had been persistently held down to stimulate the economy. With an abundant flow of cheap money banks became increasingly bold, creating ever more ingenious methods of investing their customers’ cash in excessively hazardous property loans.
Many of the bankers present had looked no further than their year-end results and as a consequence found themselves mired in a crisis of their own making. Now, as the heart of storm approached, fearing the worse, they could do little else but battening down the hatches and pray. Major European banks pulled back from New Europe, as the risk of a collapse in the region’s still fledgling banking sector grew. Together, Austrian, Belgian, Swedish and Dutch banks had loaned a total of one and a half trillion euros to Eastern Europe, and that did not include loans to the Balkan countries, Turkey, Ukraine, Russia, and Kazakhstan.
Pat Kennedy felt a deep surge of satisfaction when Sergei invited him to a very private evening cocktail and diner he was hosting in honour of Vladimir Putin. It was not only the unhoped-for opportunity of meeting the Russian leader, it was also an occasion to measure the influence of his Russian friend on the PM. Pat was ferried by a hotel car to the reception, held at the Sheraton Waldhuus, barely three hundred metres distance; walking in the deep snow was not part of the programme. He was enchanted by the setting; the Alpine winter atmosphere, the deep snow, bright lights and the anticipation of meeting one of the world’s most powerful leaders.
The hotel restaurant had been commandeered for the occasion and after passing through the security cordon and handing his heavy coat to a receptionist, Kennedy was welcomed by Tarasov, who as ever cultivated the personnel touch in his relations. The gathering was informal and Pat was quickly introduced to the other guests, one or two of them he had met at the Forum.
Putin, quite naturally, made his entry once all the guests were present. It was evident from his manner he was among friends; relaxed, smiling and friendly he shook hands with all those present. Tarasov presented Kennedy as a friend and a leading City of London banker. He underlined Kennedy’s Irish origins, which pleased the Russian leader. When Kennedy spoke in an approximate Russian this led to a confused but humoristic exchange greatly amusing the Prime Minister, who replied jokingly in quiet acceptable English.
The ice was broken and the atmosphere relaxed as the drinks and canapés were served. It was a Russian event with the formalities of the Forum and the economic crisis forgotten. The seating at the dinner tables was equally informal apart from the places reserved for Putin and Tarasov. Kennedy found himself sitting next to a very attractive tennis star, a new arrival, who talked of a sport he knew little of, which did not prevent him charming her with stories of London and its expatriate Russian community.
Pat was caught short when a bearded man, evidently a priest, dressed in the garbs and regalia of the Russian Orthodox Church, appeared and took the vacant seat to his right. For Irishman’s sake the tennis star made the presentations, introducing the newcomer as Father Tikhonov, reputed to be Vladimir Putin’s personal confessor.
‘Ah, an Irishman, a Christian believer, something rare these days,’ he said addressing Kennedy.
‘It’s a pleasure to meet you Father,’ mumbled Kennedy a little embarrassed as though he had been caught red-handed sinning.
‘We are like the Irish, believers.’
‘Yes Father, the Irish are believers,’ reaffirmed Kennedy doubting his own words.
‘Have you been to Moscow?’
‘No, but I’m planning to visit your great city very soon.’
‘Then you must visit our monastery at Sretensky,’ Father Tikhonov said as Tarasov appeared at his shoulder. ‘It dates back to the fourteenth century. Sergei will no doubt arrange it.’
Tarasov nodded in agreement.
After dinner the Prime Minister excused himself and left followed by Father Tikhonov. The evening slowly unwound, but not before Tarasov beckoned to Kennedy, inviting him for a nightcap in the bar by its blazing log fire.
‘Pat my friend, how did you enjoy meeting our Prime Minister?’
‘I was very honoured.’
‘He liked you, said you were different to the stuffed shirts at the Forum.’
Pat was flattered.
‘Did you enjoy speaking with Father Tikhonov?’ Tarasov added with a smile.
‘Yesh.’
‘He has a great influence on our prime minister.’
Kennedy nodded hoping he had not said anything silly.
‘You know Pat there are a lot of opportunities in Russia. This crisis will pass and the world needs our oil and gas. You should talk to Michael about Russia. We could do a lot of things together…we with our resources and you with your bank in the heart of the financial world.’
Back at the Steinberger Kennedy pondered Tarasov’s words. Since the last meeting of the Davos World Economic Forum, the value of the global economy had fallen an estimated twenty five trillion dollars. Where would it lead?
Were bankers to blame? Those present at Davos, safely protected from the outside world in the cocoon of Swiss luxury, rejected all accusations. Others, absent, would have more difficulty in joining their protestations, and many would certainly never have the occasion to return to Davos.
Kennedy zapped the TV catching an interview in which Putin retorted to aggressive questions by telling his interlocutor, ‘We don’t need help. We aren’t invalids….’ The Russian had refused to admit that a crisis existed in Russia, still trying to recover ground following his heavy handed invasion of Georgia the previous summer. In spite of the fall of oil prices Russia was nonetheless earning considerable revenues from its dollar-indexed energy exports.
Pat was feeling pleased, he had not wasted his time with the two and a half thousand economists, bankers, investors, politicians and hangers-on in the overheated conference centre and its dismally triste restaurants. Many of them had already sloped off to meet up with their families and friends for a few days skiing at the expense of their shareholders and investors.
He doubted the micro-climate of the high Alpine valley had done much to change the pervading mood of imminent doom. However, one thing was certain, though some may have felt chastised by recent events, the VIP participants, boarding their private jets in Zurich to return home, would have the comfort of knowing that they were part of a unique club, made up of the planet’s elite and that they would not suffer whatever the outcome of the crisis, their wealth was assured, whereas the outlook for lesser mortals was filled with grim promise.
Sergei had compared the crisis to the fall of the Soviet Union, a rupture that had seen the collapse of central planning and the loss of thousands of manufacturing plants across the corpse of the defunct Communist empire. Now it was the turn of the US, its banks on the brink of ruin and millions of home owners across the country incapable of reimbursing their debts. The collapse of the financial system had left hundreds of thousands of bright young people jobless in London and New York, young people who had been lured into the financial sector by the promise of soaring salaries and huge bonuses.
Kennedy suspected Tarasov’s concern was a façade, he was holding a trump card. It was evident his bank was backed by occult links to the Kremlin’s power machine and the help of those who had seized the huge industrial and agricultural combinats of former Soviet Union, grabbing its vast oil and gas resources; a cabal of ruthless oligarch’s.
As usual nothing real was accomplished. The hullabaloo of the Davos junket petered out like a damp squib with some predicting the economic slump could last for a decade threatening the stability of the world’s financial system and even that of governments.
Barton, like many of those who followed the news from Davos with interest, was not alone in thinking a golden age of finance was over. At best it would take a decade, perhaps more, for markets to see the kind of earnings they had seen during the boom years.
The Davos get together provided the media with a solid source of news with Bill Gates, Warren Buffet, Vladimir Putin and a host of other more or less important economic and political figures adding their grain of salt to the debate. Barton could only marvel at their imagination. It was a little too late for many; it reminded him of the plight of Ryan Kavanagh’s friends, who had abandoned their medical studies to join the gold rush in the City. He wondered what had happened to them after the rout, without a job and without qualifications.
The fallout of the banking crisis was beginning to make itself felt and not just in the City, but also in businesses and industries across the planet with the inevitable destruction of jobs. Finance was not only the sector hit, just about every other branch of the economy was suffering as consumer demand started to decline. For the first time in two decades personal incomes had fallen and the gap between rich and poor was widening. But for once, the rich were also feeling the heat, certain of them losing the fortunes they had made overnight. Barton shook his head wondering what would come next, the severity of the convulsions in financial markets were of the kind that occurred only once in a century. He was sure and certain that the after effects would bring misery to millions of ordinary people.
The pundits were incapable of predicting an outcome. Financial services faced ruin, hedge funds were bailing out as fast as they could, and as for banks they were on artificial life support as vast sums of cash were injected into the system by desperate governments. The same governments feared for their own survival as angry voters saw their pensions evaporate and their hard earned life savings reduced to ashes.
Businesses and investors were losing their faith in financial markets. The trust that had taken generations to build was shaken. Who would dare trust their money to a bank, a pension fund or any other fund for that matter? Economists, bankers and politicians quaked at the mention of the words devaluation and default.
The City of London, until so recently the jewel in the crown of Cool Britannia’s success story, had been cruelly hit and its pre-eminent position as the world’s leading financial centre was now in peril. Barton knew that whatever happened, when the dust settled, the world would be a very different place.