a curious Yankee in Europe's court

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.

I’ve been nosing around online during the past couple of days to see what leading financial experts and economists are saying about the trillion dollar bailout that the European Union leaders announced Sunday. Easily found some boos and hisses: fears that the EU is going down the same path of moral hazard that some say the U.S. has taken, for example. There’s a sample round-up of quotes and links here.

But I’ve been especially on the lookout for Nouriel Roubini’s reaction, given the extraordinary accuracy of his longstanding predictions on the 2008 financial crisis. And his verdict on this weekend’s EU bailout decision is a thumbs up, generally speaking.

In an article yesterday on CNBC.com, Roubini was quoted as saying (“European Rescue Could Work: Nouriel Roubini” May 11, 2010):

Roubini believes the sheer size of the rescue package will therefore halt the threat of contagion.

The amount, in addition to European Central Bank liquidity facilities and quantitative easing, “comfortably covers the worst case scenario and should thus help fight contagion,” he wrote.

And in a comprehensive interview with CNN Money on Monday (video below), Roubini also expressed his approval of the EU action. Here he offers his views on what he considers the risk level of other European countries, especially those of the acronym PIIGs (Italy comes out not-so-bad here, it’s good to hear).

Greece is bankrupt, Nouriel Roubini said today, speaking during an interview at the World Economic Forum in Davos (“Roubini At Davos: Greece Is Obviously Bankrupt” Jan 27, 2010). He advised the country to ask China to rescue it, and added that the European Union may also be forced to help in order to hold off a threat to the Euro monetary system itself.

None of this is news to the leaders of the European Union who have been stewing over what to do about an economically wobbling Greece for some time, according to an analysis in Der Spiegel last month, “Should the EU Save Athens from Bankruptcy?” (by Wolfgang Reuter, Dec 14, 2009).

Reuter explores how the situation presents the EU and its leaders with an urgent new governance question.  He reports in detail on some of the high-level discussions. Central theme:

“…Everyone was asking the same question: What happens when a country, even a member of the European monetary Union, goes bankrupt? Can the EU allow this?…”

Another very interesting money pot to watch boil, as if there aren’t enough already.

It’s going to get worse, Nouriel Roubini says in an interview last week (Nov. 28) with Bloomberg.com. He notes that the global economy is now in crisis.

Other comments: the U.S. economy is in free fall and the effects are spreading across the globe, and the European Bank needs to be more aggressive in cutting rates, and more stimulus spending is necessary.

Most interesting questions: is confidence the key to restoring stability in the markets, and will bank rates drop to zero?

Watch video here (17:02)

Another assessment from economist Nouriel Roubini in a CNBC interview yesterday about the ongoing Wall Street meltdown (“‘Socialism’ on Wall Street” Sept 17, 2008). Asked about the advisability of Uncle Sam rescuing the sinking insurance giant, AIG, Roubini says it’s a very bad idea.

So where was the regulation and supervision? They screwed up big time over and over again. Now we’re in a situation in which the profits have been privatized, and now the losses have been socialized…

“This is not a market economy. This is socialism for the rich, for the well-connected on Wall Street…”

Roubini rounds out his analysis by explaining his idea of what constitutes a practical and important use of public money, what should be done about the distressed U.S. housing sector, and the way to avoid massive home foreclosures.

Watch:

See previous post on Roubini here.

UPDATE: Today’s New York Times gathers some opinion from around the world on the AIG bailout (“Abroad, Bailout Is Seen as a Free Market Detour” by Nelson D. Schwartz, Sept 17, 2008)

In an interview earlier today, Nouriel Roubini from New York University’s Stern School of Business explained what many people are most worried about (the FDIC), why they’re right, and how long the tough times are going to last (“Top Economist: Americans Should Worry About Bank Deposits if Congress Doesn’t Act” by Aaron Task, Yahoo! Finance, Sept 15, 2008). See article and video here.