Wednesday, April 28, 2010

Roubini: EuroZone May Be Only Days Away from Crack Up

Nouriel Roubini is at the Milken Conference and Felix Salomon reports in on Roubini's panel comments:
Nouriel, of course, takes that kind of thinking to its logical conclusion, and kicked off the panel by announcing that it was just in time: “in a few days,” he said, “there might not be a eurozone for us to discuss.” There’s no way that Greece can implement the 10% spending cut it needs to do in order to stop its debt spiraling out of control at current interest rates — and even if it did, the economic effects would be disastrous.

Nouriel’s base case, then, is Argentina 2001: after all, Greece has a much higher debt-to-GDP ratio, much higher deficit-to-GDP ratio, and much higher current-account deficit than Argentina had back then. And if that’s the base case, there’s no way that Greek debt should be trading anywhere near its current levels.


  1. I'd like to see how close Portugal, Spain, Ireland, etc are compared to Argentina' 2001 levels. That would an interesting comparison.

  2. and even if it did, the economic effects would be disastrous

    I'm always confused about what people like Roubini find to be "economically disastrous" about an economy that more closely mirrors reality.