Wednesday, May 26, 2010

More Roubini: Euro To Weaken Further, Serious Difficulties, Some Countries Will Be Forced To Abandon Currency

Nouriel Roubini is making the news round again. This time, the professor was at a conference in Bucharest saying that markets are not convinced that Greece will control its budget deficit and that has "undermined confidence in the euro" (Bloomberg). Talk about an understatement!

He adds that there are also concerns Spain and Portugal, countries which "lack the political will to cut spending". Note that italy today announced budegt "cuts" in the form of contained salary raises.

“The markets are not credibly convinced Greece can do the fiscal adjustment it engaged to do,” . There are “also questions whether, from a political point of view, there’s going to be support for budget consolidation in these countries -- Greece, Portugal and Spain.”

Euro To Weaken Further

Roubini also adds that the euro will weaken further, and some countries may be forced to abandon the common currency,

“I’m not predicting the breakup of euro zone, but the probability is not zero that some of weakest members of euro zone might decide to exit it,”

There are “serious economic difficulties in the euro zone,” “There’s even a risk of a double-dip recession"

"The recovery will be more robust in emerging markets than in developed countries"

“I’m concerned about the economic prospects of Japan and optimistic about the U.S., but even there the economic growth is going to be below trend,” “I’m more concerned about prospects of the euro zone.”

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