Saturday, June 26, 2010

Nouriel Roubini on Europe trillion-dollar rescue package

"I'm worried that this particular trillion-dollar rescue package in Europe is not going to work because even if there is money on the table, first of all, it's conditional on this country making lots of sacrifices. Then you have to ask yourself, "Can you reduce the budget deficit by 10% of the GDP by cutting spending or raising revenue in places like Greece or other European countries?"
Politically, it's going to be very hard. Two, if you raise taxes and cut spending, you're going to have more recession in the short run. Can a country accept year after year of a recession in order to achieve stabilization of the deficit? That's highly unlikely. Three, these countries were facing an issue of competitiveness because they were already losing market share to China/Asia a decade ago, as their exports were labor-intensive. And then they had the decade where wages were growing more than productivity.

in The Motley Fool read full interview >>>

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