Saturday, March 27, 2010

Roubini Shifts to Italy: Country Has Very Difficult Structural Challenges

After Greece, Nouriel Roubini is also warning that the risks to Italy's structural challenges in the long run are also difficult, although its risks are lower than those of other countries in the euro zone with weak fiscal position.

According to him, Italy has a high public debt, but has not implemented any fiscal stimulus. Please see our post on this matter showing Italy to be the fifth worst country.

Its long-term challenges, however, such as increasing the productivity gap with Germany, are very great for Italy. He said "there is a certain complacency in Italy." He adds that the country, as well as Greece and Spain, must embark on structural reforms to the German style, involving containment of wages and increase productivity.

The process should take a decade to bring results. Roubini cited the case of Germany, which showed weak growth from 1996 to 2006.

As reported here, yesterday, the vice president of the People's Bank of China, Zhu Min, expressed concern over Italy in comments on the fiscal crisis in Greece and the euro area. "Greece is only one case is the tip of the iceberg," said Zhu. According to him, "the main concern today is obviously Spain and Italy."

With news from Agencia Estado.

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