Tags: Roubini | Italy | Eurozone

Roubini: Italy's Days in Eurozone May Be Numbered

Thursday, 10 Nov 2011 08:16 AM

Italy's 1.9 trillion euro ($2.586 trillion) debt may be so large that restructuring won't right its economy and it exist from the currency group may be inevitable, says New York University economist Nouriel Roubini.

Italy has taken center stage in the European debt crisis, stealing the spotlight from nearby Greece over concerns that its crushing debt burdens may disrupt the European economy.

Since the Italian economy is large, other European nations may rush to keep it in the eurozone but economic fundamentals won't improve merely with debt restructuring.
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"Given that it is too-big-to-fail but also too-big-to-save, this could lead to a forced restructuring of its public debt," Roubini writes in an Financial Times opinion piece.

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Nouriel Roubini
(Getty Images photo)
"That would partially address its 'stock' problem of large and unsustainable debt but it would not resolve its 'flow' problem, a large current account deficit, lack of external competitiveness and a worsening plunge in gross domestic product and economic activity."

"To resolve the latter, Italy may, like other periphery countries, need to exit the monetary union and go back to a national currency, thus triggering an effective break-up of the eurozone."

"Even a restructuring of the debt – that will cause significant damage and losses to creditors in Italy and abroad – will not restore growth and competitiveness...if you cannot devalue, or grow, or deflate to a real depreciation, the only option left will end up being to give up on the euro and to go back to the lira and other national currencies."

Fears are growing that the crisis will throw Europe into recession, and global leaders are urging policymakers to contain the crisis.

"Political clarity is conducive to more stability ... it is much needed in Greece, it is much needed in Italy," the IMF chief Christine Lagarde, according to the AFP newswire.

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Italy's 1.9 trillion euro ($2.586 trillion) debt may be so large that restructuring won't right its economy and it exist from the currency group may be inevitable, says New York University economist Nouriel Roubini. Italy has taken center stage in the European debt crisis,...
Roubini,Italy,Eurozone
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2011-16-10
Thursday, 10 Nov 2011 08:16 AM
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