Wednesday, November 9, 2011

Roubini: The Plane Is In Stall, Europe May Implode; Countries May Leave, Governments May Fall

Nouriel Roubini said today in Brazil that the risks of a double dip in the world economy are higher than the chances that the level of global activity will accelerate in the short term. He said one factor that could be decisive even worse than in 2008 with the collapse of investment bank Lehman Brothers, is the possibility that problems in the euro area is still worsen more, which may lead some countries to have to abruptly leave the block.

Two Roads. Roubini said the severity of the crisis in Europe will determine one of two roads to its member countries in the short and medium term. "Either they do economic and fiscal integration, and me political too, or it will implode from the exit of some of its members," Roubini said during a talk to businessmen, in Sao Paulo, Brazil

He said the authorities in Europe are doing little to tackle structural problems in the region. He noted that, besides improving the management of public accounts, the authorities must act to stimulate growth in the euro zone, otherwise the social and political instability will grow.

"The Euro area, United Kingdom and United States have serious fiscal problems, with very high public debt. However, the solutions to structural problems, especially in the euro area have primarily financial focus. They lack finding of ways for growth to be restored, because without it, the insecurity increases, unemployment rises, there are social and political tensions, culminating in the fall of governments."

Plane in stall mode. "There are already signs that the eurozone and the UK are in recession, while the United States are still in a border area," he said. "The United States grew 2.5% in 2010, a mediocre level, because the historical rate is 3%. In the first half of this year, 2011, the United States showed an increase of only 1%," "The global economy can be seen as a plane in flight, which currently is in stall mode"

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