Roubini: Dilemma of Extreme Policies: Maintain Stimulus: High Inflation or Default; Withdraw: Depression

Nouriel Roubini said today in Switzerland that governments with growing budget deficits faced a "dilemma of extreme policies," since they must balance the need to stimulate economic recovery with the need to keep debt under control:

"The current increase of the tax debt is taking an extreme policy dilemma - on one hand, we need the monetary and fiscal stimulus because the recovery of private demand is still anemic,"

"Second, maintaining the stimulus for a long time could cause a risk of deficits and high inflation or default",

"The question is what to do - withdraw from the monetary and fiscal stimulus too fast, there is a risk that turns into recession and deflation, perhaps even depression,"

Roubini also said that major economies like U.S., Japan and the United Kingdom, which have direct control over their national currencies, could print money to avoid a problem of sovereign debt, but this measure would bring the risk of high inflation. He added that the governments of the eurozone faced real challenges: "Greece is just the tip of the iceberg," he repeated.

Last week, Roubini had declared that the countries of Eastern Europe and Central Europe that have high budget deficit had no alternative but to adopt austerity measures and tax reforms.