Nouriel Roubini, also known as Dr. Doom, provided his latest gloomy picture of the global economy with a focus on the European debt crisis.
But Roubini also provided some solutions for the old continent: slashing interest rates, fiscal unity and a euro worth less than one dollar.
Speaking in a conference in London, the NYU professor famous for foreseeing the financial crisis also said that Greece isn’t the epicenter anymore, but that the crisis has already spread to Spain, Italy and even Germany. Germany’s economy grew by only 0.1% in Q2 The economy in France stalled.
What’s wrong with current policy? According to Roubini:
“Everybody is doing the same thing [cutting government spending]and by doing it at the same time, they are making [the crisis]worse.â€
He warned about the impact of austerity in Britain and sees a stall in the US economy in Q4.
Solution for Europe according to the Dr.: The key to moving forward is growth. For that to happen in Europe, the ECB should cut interest rates (that’s obvious), more fiscal unity is needed (will take some time) and “the euro needs to trade below parity against the dollarâ€.
The euro is moving lower, but parity is far from sight. Only a very disorderly default of Greece can send the euro that low. There are higher chances of an orderly, yet not so elegant default coming this quarter. See the Q4 outlook below for all the scenarios.
