Nov 1, 2011

Renowned Economist Nauriel Roubini warns Lehman-type scenario out of European debt crisis

Eminent international economist NAURIEL ROUBINI who has so far been most accurate economic forecaster than most of others, has recently warned on 2008-Lehman-type credit crisis scenario and slowing-trend in growth of world’s major developed economies as well as China’s.
He also warned of Euro currency falling apart and Greece to be the first amongst those leaving eurozone monetary union.
On China, he said there is going to be hard-lending and following slower growth or no incremental growth which will have effect on world economy as china is now a growth engine for world in many ways.

Read the full article below,

PERTH (MarketWatch) –
Nouriel Roubini, the economist best known for predicting the global credit crash, said Tuesday the advanced world is sliding toward another recession and Europe could experience a series of sovereign defaults triggering market disruption on a scale witnessed after the crash of Lehman Brothers in 2008.
The U.S.-based economist also warned that China's growth path is unsustainable and a massive banking crisis and hard landing in two years time is possible, robbing the world of it's major growth engine.
His bleak outlook comes as Europe's leaders inch toward a deal to shore up the euro zone and the region's banks.
"There's a significant probability there's going to be another recession in most advanced economies ," Roubini told business leaders gathered here for the Commonwealth of Nations conference. He singled out the euro zone, the U.K. and the U.S. as prime targets for economic contraction.
Roubini said regardless what agreement is reached in Europe, the single currency could still fall apart with Greece likely the first to leave and the biggest risk is for a disorderly series of defaults in the euro zone stretching from Portugal to potentially Spain and others.
"The shock that could occur could be as large, if not larger, than the disorder after the collapse of Lehman," said Roubini, who teaches at New York University and is sometimes known as Dr. Doom. He said Europe's leaders must embrace much deeper fiscal cooperation.
For the world's second-biggest economy, China, which has been enjoying growth rates above 9.0% helped by massive stimulus through the form of bank lending, Roubini said the property sector there poses a severe risk and could turn sour, leaving both banks and the government burdened with heavy debts.
"There could be a hard landing in China over the next two or three years," he said. "There's not a single episode of coming out of an over-investment boom with a soft landing. Real estate booms always end up in busts."
But there are positives in the world. Latin America, parts of sub Saharan Africa, central Europe and the Middle East are holding up while firm demand for resources means Australia and Canada should escape the worst of any slump, Roubini said.
-By Enda Curran

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