Europe Economy

Greece 'Nearly Insolvent,' Bailout Won't Work: Roubini

Michelle Lodge

Europe's current bailout plan for Greece "is not going to work" because "Greece is nearly insolvent," well-known economist Nouriel Roubini told CNBC Wednesday.

"A restructuring of its debt is going to be necessary," said Roubini, chairman and NYU professor.

A collapse of the Greek economy could have domino effect among other weak eurozone countries—including Portugal, Spain, Italy and Ireland, he said.

“Suppose you have a disorderly collapse of Greece, two things will happen," he added. "Financial institutions holding Greek debt—mostly European—will have massive losses. Secondly, a contagion from Greece to Portugal to Spain to Italy to Ireland will have a domino effect."

Eventually, debt increases and risk aversion is going to drive down the asset prices globally, as it happened yesterday and today.”

Debtor Nations

Roubini said that effects of such a Greek scenario won’t immediately impact the United States, but predicted that a rough road is ahead in the second half of 2010 due to other factors.

He said once the stimulus and tax credit are phased out and such programs as the Census hiring gone, “I see a slumping down to 2 percent (growth) or below.

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