European Rescue Could Work: Nouriel Roubini

The size of the rescue package agreed at the weekend by European Union countries and the IMF is likely to cover the borrowing needs of vulnerable euro zone countries, according to famous economist Nouriel Roubini.

CNBC.com Nouriel Roubini

"Assuming hypothetically that the total financing needs for Portugal, Ireland and Spain were to be covered until 2012, the size of the package would need to be about 600 billion euros," Roubini, together with a team of economists, wrote on his web site RGE Monitor.

Roubini, dubbed Dr. Doom by the media but Dr. Realist by a poll of CNBC.com readers, had been predicting for weeks before the bailout that the Greek crisis was just the tip of the iceberg.

But at the weekend the EU surpassed markets' expectations by unveiling a 750 billion euro ($945 billion) emergency rescue package to help stabilize markets and prevent the break-up of the euro.

The aid package was initially reported to be around 720 billion euros with the IMF's contribution at 220 billion euros, but the final IMF contribution will be 250 billion euros, which brings the total to 750 billion euros.

The remaining 500 billion euros will be contributed by the EU.

Roubini believes the sheer size of the rescue package will therefore halt the threat of contagion.

The amount, in addition to European Central Bank liquidity facilities and quantitative easing, "comfortably covers the worst case scenario and should thus help fight contagion," he wrote.

The aid package will also force euro zone countries to cut their budget deficits to avoid getting even more into debt, he said.

"In addition, the relatively high interest rates on joint loans should serve as an incentive for euro zone members to put their fiscal house in order without recurring to the facility," Roubini added.