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Wealth gap, debt top risks ahead of Davos

By Ben Hirschler

LONDON (Reuters) - Fragile economies and extreme weather have combined to crank up the global risk dial in the past year, creating an increasingly dangerous mix, according to the World Economic Forum.

Despite Europe's avoidance of a euro break-up in 2012 and the United States stepping back from its fiscal cliff, business leaders and academics fear politicians are failing to address fundamental problems.

That is the conclusion of the group's Global Risks 2013 report, which surveyed more than 1,000 experts and industry bosses and found they were slightly more pessimistic about the outlook for the decade ahead than a year ago.

"It reflects a loss of confidence in leadership from governments," said Lee Howell, the WEF managing director responsible for the report.

Severe wealth gaps and unsustainable government finances were seen as the biggest economic threats facing the world, as they were last January. There was also a marked increase in focus on the dangers posed by severe weather.

The 80-page analysis of 50 risks for the next 10 years comes ahead of the World Economic Forum's (WEF) annual meeting in the Swiss ski resort of Davos from January 23 to 27, where the rich and powerful will ponder the planet's future.

Bringing together business leaders, politicians and central bankers, Davos has come to symbolize the modern globalised world dominated by successful multinational corporations.

Chief executives arriving on their private jets may still ooze confidence but "Davos man" - and most delegates are male - has plenty to worry about these days.

"Most of the risks have gone in the wrong direction in the past year," Howell told reporters on Tuesday.

On the economic front, eurozone instability will continue to shape global prospects in the coming years and the "associated risk of systemic financial failure, although limited, cannot be completely discarded," the report said.

SUPERSTORM SANDY

Concerns about rising greenhouse gas emissions have grown notably in the past 12 months. The issue is ranked as the third biggest worry overall, while failure to adapt to climate change is viewed as the biggest single environmental hazard.

Superstorm Sandy, which wreaked havoc on the U.S. east coast in October, was a wake-up call for many. But it was not an isolated event in a year that also saw droughts, floods and the Arctic sea ice melting to a record low level.

Extreme weather was on display again this week as Australia grappled with fires and heatwave conditions, while temperatures in China plunged to a 28-year low.

"Two storms - environmental and economic - are on a collision course," said John Drzik, chief executive of Oliver Wyman, a unit of insurance broker Marsh & McLennan.

"If we don't allocate the resources needed to mitigate the rising risk from severe weather events, global prosperity for future generations could be threatened."

This year's Davos meeting takes as its theme "resilient dynamism", in recognition of the need for governments and businesses to develop strategies to ensure critical systems continue to function in the face of such threats.

Outside the interlinked areas of the environment and the economy, the WEF identified other dangers, including increasing resistance of bacteria to antibiotics and the danger of "digital wildfires" created by the rapid spread of misinformation online.

More outlandish risks, dubbed "X-Factors," include the rogue deployment of geo-engineering to counter climate change, for example by injecting particles into the stratosphere, or the discovery of alien life, which would challenge many assumptions underpinning religion.

(Editing by Jason Neely)

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