Organizers of the World Economic Forum said Wednesday that at least 40 heads of state and 18 of the world's central bankers will be among the expected 2,600 participants, making it the biggest such gathering in four decades at the Swiss Alpine resort.
The exclusive, invitation-only meeting of government and business leaders is held to foster debate on the world's most pressing problems.
"We are looking desperately around the world for people who can offer solutions," said the forum's founder Klaus Schwab.
Other public figures expected at the Swiss Alpine resort include Christine Lagarde, managing director of the International Monetary Fund, U.S. Treasury Secretary Timothy Geithner, U.N. Secretary-General Ban Ki-moon and League of Arab States Secretary-General Nabil Elaraby.
Schwab said capitalism in its traditional form is no longer really working. The world's major economies are burdened by debt and have "failed to learn the lessons" from the 2008-2009 financial crisis, he said.
"We are in danger of completely losing the confidence of future generations," he said. "The question is what can we do, and what should we do, without looking for scapegoats and easy answers."
The five-day annual meeting will likely be dominated also by discussion of the wave of Arab Spring protests and comes just months ahead of Russian and French elections. Last year's forum was held just as Tunisia and Egypt were roiled by protests fueled by a lack of jobs and political inclusion.
Merkel's role as leader of Europe's largest economy will be much on display at the forum.
Germany has been paying the lion's share of the bailouts in Europe's debt crisis. But there are signs that even its economy, which has so far grown strongly throughout two years of financial turmoil, is slowing down. Some fear that could further temper the country's willingness to rescue fellow euro countries.
The German government cut the country's 2012 growth forecast to 0.7 per cent from 1 per cent on Wednesday. It predicts the country will avoid sinking back into recession, although the fourth quarter is expected to show economic contraction of up to 0.3 per cent.
The Davos forum, which has been criticized for being a gathering of rich and powerful people disconnected from the world, will again see some protests.
Activists inspired by the Occupy Wall Street movement have set up an igloo camp outside the meeting buildings. None of the protesters have been invited to the panels, but the Geneva-based forum's organizers say activists can join the public at certain parallel events being held.
Last week, the World Economic Forum said the financial crisis of the past few years is fueling resentment that could spark protectionism, nationalism and social unrest.
In a warning to government leaders, the Geneva-based international organization said leaders risk ushering in a "dystopian future" because of the impact of young people with few prospects, retirees dependent on debt-saddled states and an expanding gap between the rich and poor.