Despite Thursday's unexplained surge in selling that drove the Dow down 900 points, the stock markets are being driven lower by fears over the global economy and the debt crisis spreading, economist Nouriel Roubini, of RGE Monitor, told CNBC Friday.
Greece is just the "tip of the iceberg" for the problem of accumulating debt, and it must be solved by raising taxes and cutting spending, if not default will follow, Roubini said.
"My concern is eventually, not this year, it may spread to Japan and in the US," he said.
"In my view there's going to be a restructuring of the debt in Greece," Roubini added.
Euro zone members who borrow in their own currency actually act more like emerging-market countries who borrow in other currencies, because they don't have control over monetary policy, he said.
The European Central Bank should have restarted the longer-term liquidity injections that they had stopped, and the fact that ECB President Jean-Claude Trichet said nothing about this in Thursday's news conference led to the market nervousness, according to Roubini.
"I think the ECB made a mistake," he said. "This pressure in the inter-bank market is becoming larger by the day. What the ECB is doing is not helping to solve liquidity problems."
There are concerns about public debt problems in Europe expanding, there are signs of weakening in China, and the weak retail sales figures in the US were weak, he said.
"The fundamentals are those that are driving these markets," said Roubini.
But the debt problems are not confined to Europe, because printing money to finance debt is likely to lead to inflation and "at some point in the future even the bond market in the US risks to snap," he added.