Sovereign Debt Crisis Likely to Spread: Roubini
CNBC EMEA Head of News
The sovereign debt crisis facing Europe, which started in Greece, is spreading to many other large economies in the Organization for Economic Cooperation and Development (OECD), according to New York University professor of economics Nouriel Roubini.
"Public debt sustainability has exploded as a serious issue in advanced economies, most notably in the euro zone's 'PIIGS' —Portugal, Italy, Ireland, Greece and Spain—but also in many larger OECD economies, including the United States," Roubini said in a note posted on his Roubini Global Economics Web site.
As the Greek government meets with International Monetary Fund (IMF) officials in Athens, the man who called the financial crisis warns that Greece's problems will not be solved by any rescue package.
"These issues within the euro zone stem primarily from a loss of competiveness, high wage growth and labor costs which outstripped productivity, undisciplined fiscal policies and, crucially, the appreciation of the euro between 2002 and 2008," he wrote.
Mirroring comments from other bears like George Soros Roubini believes the bailout will not work because it does not address those problems.
"Current EU/IMF plans to rescue the worst-placed of these countries—Greece—have drawn well-placed skepticism from markets as they fail to deal with core issues of debt sustainability," he also wrote.
Roubini expects the euro zone to underperform the rest of the world in 2010. He predicts the euro zone will grow by just 0.9 percent versus 2.8 percent in the US.
Asia, excluding Japan, is likely to soar ahead this year with growth of 8.2 percent, while Latin American growth will top 4 percent over the course of the year, he predicts.