Economist Roubini says reality check is looming for Eurozone
At least, and that’s rather exceptional, Nouriel Roubini spreads the gloom around evenhandedly. Writing an op-ed piece this week for Project Syndicate about problems of the Eurozone, he grounds the assessment in a disapproving scowl at most of the world’s biggest economies (“The Eurozone’s Autumn Hangover” Sept 15, 2010):
.. all the factors that will lead to a slowdown of growth in most advanced economies in the second half of 2010 and 2011 are at work in Germany and the rest of the eurozone. Fiscal stimulus is turning into fiscal austerity and a drag on growth. The inventory adjustment that drove most of the GDP growth for a few quarters is complete, and tax policies that stole demand from the future (“cash for clunkers” all over Europe, etc.) have expired…
Roubini’s primary concern seems to be that European leaders have largely postponed having to account for Europe’s economic problems, rather than finding a real resolution for them:
In the periphery, the trillion-dollar bailout package and the non-stressful “stress tests” kicked the can down the road, but the fundamental problems remain: large budget deficits and stocks of public debt that will be hard to reduce sufficiently, given weak governments and public backlash against fiscal austerity and structural reforms; large current-account deficits and private-sector foreign liabilities that will be hard to rollover and service; loss of competitiveness (driven by a decade-long loss of market share in labor-intensive exports to emerging markets, rising unit labor costs, and the strength of the euro until 2008); low potential and actual growth; and massive risks to banks and financial institutions (with the exception of Italy).
You can read the whole essay here.
