Roubini Highly Skeptical: Probability Next to Zero That European Plan WiIl Restore Growth

The stock markets may rally for another two months on the "saving" of Europe, but another voice is expressing doubts.

Nouriel Roubini says the markets will become skeptical on the euro zone's grand plan within a matter of weeks. In addition, they will struggle to get foreign investors on board. There are reports that delegations have been sent to China already, and wil e heading next to Brazil to ask for money. How bizarre is that?
"In the next few weeks there will be questions about the viability of what has been decided and increasingly the markets are going to become skeptical this is a solution to the euro zone,"

Roubini says the scheme that protects investors against the first 20% of an eventual loss would only reduce Spanish and Italian risk premiums over German bunds by 40 to 50 basis points.

"That's not enough and makes those bonds very risky," "50% has been imposed on Greek creditors, so why would you want to take an exposure on Italy and Spain?"

Also, he says that the Greek restructuring is designed to prevent credit default insurance being triggered, (that is what they were designed to do), the same would be the case if ever there was a haircut on Spanish or Italian debt, and more trouble would ensue.

That is another problem. The CDS markets were thrown in turmoil with this new aberration.
"The recession is already ongoing in the euro zone," "People are going to say it's good financial engineering, but unless you have economic growth there is going to be a train wreck."

"To restore growth the European Central Bank would need to reverse completely and aggressively cut rates, [...] and the euro would have to fall toward parity with the U.S. dollar. Stimulus would also be needed from the core countries in the euro zone.

The probability of those three things happening is close to zero",