Roubini Says Greece May Lead Euro Exodus, China Faces SlowdownBy Shamim Adam and Susan Li
May 12 (
Bloomberg) -- New York University professor Nouriel Roubini said Greece and other “laggards” in the euro area may be forced to abandon the common currency in the next few years to spur their economies.
A “real depreciation” in the euro is needed to restore competitiveness in nations including Spain, Portugal and Italy, he said in an interview on Bloomberg Television today. The euro will remain the currency for a smaller number of countries that have “stronger fiscal and economic fundamentals,” Roubini said.
The European Union and International Monetary Fund last week approved a 110 billion-euro ($139 billion) lifeline for Greece to arrest the country’s fiscal crisis and stop the turmoil from spreading. Europe’s debt woes may push it into a “double-dip” recession, growth in advanced nations will be “anemic” and China’s overheating economy risks a slowdown, Roubini said, adding that Greece may still eventually need to restructure its debt.
“The challenge of reducing a budget deficit from 13 percent to 3 percent in Greece looks to me like mission impossible,” Roubini said. “I would not even rule out in the next few years one or more of these laggards of the euro zone might be forced to exit the monetary union.”
Greece agreed to the package on May 2, pledging 30 billion euros in wage and pension cuts and tax increases in the next three years to tame the euro-region’s second-biggest deficit.
Prime Minister George Papandreou had revised up the 2009 budget deficit to more than 12 percent of gross domestic product, four times the EU limit, and twice the previous government’s estimate. EU officials revised the deficit further on April 22, to 13.6 percent of GDP. ............(more)
The complete piece is at:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWx2RrHBu90A&pos=6