A Global Perfect Storm

by Nouriel Roubini Nouriel Roubini is Chairman of Roubini GlobalEconomics, Professor of Economics at the Stern School of Business, New YorkUniversity, and co-author of the book Crisis Economics 15.06.2012

Introduction

To prevent a disorderly outcome in the eurozone, today’s fiscal austerity should be much more gradual, a growth compact should complement the EU’s new fiscal compact, and a fiscal union with debt mutualization (Eurobonds) should be implemented.  In addition, a full banking union, starting with eurozone-wide deposit insurance, should be initiated, and moves toward greater political integration must be considered, even as Greece leaves the eurozone.

Unfortunately, Germany resists all of these key policy measures, as it is fixated on the credit risk to which its taxpayers would be exposed with greater economic, fiscal, and banking integration. As a result, the probability of a eurozone disaster is rising.

And, while the cloud over the eurozone may be the largest to burst, it is not the only one threatening the global economy

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