Monday, November 29, 2010

Roubini: There is Not Enough Money To Save Spain

Nouriel Roubini said today that there may not be enough money to bail out Spain. He qualifies Spain as the “big elephant in the room” in the European debt crisis. However, he predicts that next in line is Portugal.
“It is quite likely that Portugal” “The big elephant in the room is not Portugal but, of course, it’s Spain. There is not enough official money to bailout Spain if trouble occurs.”

Bloomberg: "The cost of insuring the debt of Spain and Portugal soared to record-high levels today, according to CMA prices for credit- default swaps. Contracts on Spain climbed 14 basis points to 336 while Portugal rose 23 basis points to 524".

"As the number of countries needing bailouts or financing help grows, Roubini said sovereign debt, and in turn “supranational debt,” will increase as well".

He says that at some point debt restructuring could occur become inevitable for the sovereigns and also those financial institutions, adding that the IMF may be one such institution.

“Even the QE2 is not sufficient to restore growth to the trend level,” “The problems of the economy are not problems of liquidity, but problems of credit insolvency, and therefore monetary policy cannot resolve this.”

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