Roubini: If the Eurozone blows up, it all gets worse

November 4, 2011 06:10

“Europe is a slow motion train wreck and there’s a “significant risk of a Eurozone breakup.” This doesn’t mean Greece and Portugal leaving, it means Spain and Italy ultimately leaving as well, which would mean the whole thing is toast.” – Business Insider

Joe Weisenthal at Business Insider


The fundamental problem — which is something he laid out in a note to clients this week — the matter of flows. While Europe might be able to address some “stock” problems (the size of the debt), there’s no answer to the matter of growth and trade deficits, which the periphery countries are consistently running.

So the basic strategy of the IMF/Germany is this: Keep Greece on life support long enough for a big bazooka to save Italy and Spain, at which point, when it’s obvious that austerity doesn’t work (which everyone knows) then, perhaps in a year from now, you let Greece default. The hope is that Spain and Italy are okay by then. Roubini is, not surprisingly, skeptical.


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