Wednesday, October 2, 2013

Roubini warns of Spanish Debt Trap

Speaking at a conference, New York University (NYU) Economics Professor Nouriel Roubini has offered his economic forecasts for Spain, stating that growth will not surpass 1 per cent during the next three or four years, Spanish daily El Economista reports.

Roubini added that growth will not be enough to reduce the excessive unemployment rate. Although he acknowledged that exports have improved, Roubini explained that Spaniards will find themselves in a debt trap as salaries fall in an internal devaluation necessary to improve competitiveness and as home prices fall, making households more indebted in turn hurting domestic demand.

Roubini, nicknamed Doctor Doom for his gloomy predictions, added that Spanish debt dynamics over the medium-term do not appear sustainable.

However, Spain, unlike Italy, no longer faces the risk of losing market access, Roubini pointed out.
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