Europe’s debt crisis, which has seen Greece’s debt downgraded to junk, puts the euro zone at risk of a double-dip recession, says star economist Nouriel Roubini.
"I would say that the risk of a double-dip recession is highest in the euro zone,” he told CNBC.
“The sovereign debt problems are severe. There’s shock in the markets. I would say there is more than a 50 percent probability that growth will be zero, if not a technical double-dip.”
Greece’s debt burden ballooned to 86 percent of GDP last year, and Portugal’s hit 56 percent.
Roubini says the economic weakness means governments and central banks can’t reverse their fiscal and monetary stimulus yet.
"The downside risk to growth is significant, so taking stimulus away now is a huge mistake," he warned.
As for the United States, we will avoid recession, Roubini says, but growth will slip below 2 percent by the second half of the year.
That entails rising unemployment, falling home prices, an expanding budget deficit, higher bank loan losses and worsening trade protectionism.
“That’s a very bad economic outlook and means downside risks for financial markets.”
Meanwhile, hedge fund legend George Soros says the whole world is at risk of a double-dip recession.
“The collapse of the financial system as we know it is real, and the crisis is far from over,” he said in a recent speech. “Indeed, we have just entered Act II of the drama.”
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