Tags: Roubini | Eurozone | Lending | Praying | Hoping

Roubini: Eurozone Just Lending, Praying and Hoping

Wednesday, 15 Dec 2010 10:41 AM

Eurozone economies are running an economic policy of lending — and then hoping and praying for the best, says New York University economist Nouriel Roubini.

The good news is that advanced economies probably won't experience dreaded double-dip recessions next year, and emerging-market superstars like China, India and Brazil will grow collectively at 6.3 percent in 2011, more than triple the 2.1 percent that industrialized economies will grow, Roubini told the U.K. Telegraph.

The U.S. economy will expand 2.7 percent next year, boosted by quantitative easing and tax breaks, but in crisis-riddled Europe, economies will grow but won't be out of the woods yet.

"The risk of something disorderly happening is still significant," Roubini says. "At the moment, the policy is still lend, pray and hope this is a liquidity problem and not a solvency problem."

Germany will grow 2.2 percent in 2011, down from an estimated 3.5 percent growth rate for this year, and pressure will rise on Berlin to spend in order to compensate for weaker neighbors.

France and Italy, Roubini says, will grow just 1.3 percent and 0.8 percent, respectively.

Greece and Portugal will spend 2011 locked in recessions due to austerity measures, while Spain will remain flat, growing at just 0.1 percent.

Ireland, another one of Europe's troubled economies, will grow 1 percent.

European monetary officials need to expand a rescue fund of over $1 trillion if the continent is to continue propping up ailing economies, Roubini says.

"Today, official resources are only enough to keep Ireland, Portugal and Greece out of [the bond] market."

"The envelope has to be increased significantly."

European Union President Herman Van Rompuy has said Europe would consider expanding the emergency fund "if needed" but was quick to add "that is not a question today," according to the AFP newswire.

Dominique Strauss-Khan, managing director of the International Monetary Fund, a multilateral lending institution, has said Europe needs to attack its economic problems more comprehensively.

"Europe needs something more dynamic ... a comprehensive solution ... not piecemeal, one country at a time," says Strauss-Kahn, according to the AFP.

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Eurozone economies are running an economic policy of lending and then hoping and praying for the best, says New York University economist Nouriel Roubini. The good news is that advanced economies probably won't experience dreaded double-dip recessions next year, and...
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Wednesday, 15 Dec 2010 10:41 AM
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