The debt crisis is a game changer for the market and Europe is now at risk of heading into a double-dip recession, Arnab Das, managing director of market research and strategy at Roubini Global Economics told CNBC Monday.
"A lot of the logic behind the powerful rally we had is coming undone," Das said. "The v-shaped argument is becoming weaker, there is a chance of a double dip in Europe, and in US the risk is that growth will falter.”
Das works with noted economist Noriel Roubini at RGE. Roubini was nicknamed "Dr. Doom" by the New York Times after his prediction of the dire economic consequences that would stem from the housing crisis.
"There had been a strong recovery until the euro zone debt crisis began," Das said. "Euro zone governments are attempting to stem the flow but it does not appear to be working. It is no longer credible to say we will get through the crisis without a market reaction. China is tightening monetary policy; the US consumer is pretty weak."
Those who look at the market and ask why stocks are trading lower when many firms are doing so well are missing the point, he said.
“Greece is the tip of the iceberg," Das said. "There is now a major risk of contagion towards countries like Spain and the even the UK is highly indebted. Austerity measures will force growth lower, this will hit corporate profitability."
“We need a period of deleveraging," he added. "The markets need to be cleansed of all this debt. We are not there yet and we will have some defaults."
Eventually the debt crisis will head to the US, but the day of reckoning has been pushed back by Europe’s woes, he said.
"Eventually the US will face the same problems as euro zone, but the bond market will probably give the US until 2012 to get their act together."