Contagion is spreading outside Europe, Asia possibly next flash zone
Economist Nouriel Roubini feels that the key to ending the crisis that is impacting Asia is involvement from the international community. December 06, 2011 | Nouriel RoubiniEven as indications that some stability is coming to the sovereign crisis in the Eurozone are starting to appear, with hints at broader commitment to the much-needed evolutionary step of a fiscal union along with a serious plan to finance the European Financial Stability Facility (EFSF), much of the damage runs deep and is widespread. “There is already a significant amount of contagion spreading, not just within the Eurozone but also outside of the Eurozone,” says Nouriel Roubini, famed economist and chairman of Roubini Global Economics (RGE). “It is not just spreading throughout the Eurozone periphery and the banks, but also to core banks in the Eurozone, French banks and Belgian banks.” Roubini will present his views in an Asian context at a special session during The Asian Banker Summit 2012 in Bangkok. Roubini sees problems spreading across the Atlantic to the US, with five-year swap spreads going up to levels seen in mid-2010. “There are also concerns about contagion to US banks,” says Roubini. “While the net exposure of US banks to European financial institutions and sovereigns may be limited, their gross exposures are much larger, and right now we know from sources within the New York Fed and others that US authorities are becoming increasingly concerned about these gross exposures.” While it is important for troubled economies in Europe to get their houses in order, it will be difficult to accomplish this, even in Italy and Spain where new governments have a great deal of political capital. Roubini is concerned that the necessary fiscal austerity and further structural reforms will worsen the recession within those markets. “The bitter medicine that the ECB and Germany are now imposing on Italy and the other PIIGS will make the Italian recession, like that in Greece, a depression, as raising taxes, spending cuts and transfer payments reduce aggregate demand and disposable income,” says Roubini. Clearly, a significant amou... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, Government Finance, Risk and RegulationCapital & Strategic Issues,Government Finance,Risk and Regulation, Capital & Strategic Issues,Government Finance,Risk and Regulation, , Capital Marketscapital, Capital Markets, Keywords:Nouriel Roubini, Eurozone, Italy, Greece, Spain, Germany, European Financial Stability Facility, Andy Xie, Morgan Stanley Nouriel Roubini, Eurozone, Italy, Greece, Spain, Germany, European Financial Stability Facility, Andy Xie, Morgan Stanley
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