The world’s developed economies are trapped at the “stall speed” of low growth and need to have greater fiscal stimulus and less austerity to kick-start growth, leading economist Nouriel Roubini told CNBC Friday.
Speaking at the Ambrosetti Forum on the shores of Lake Como, near Milan, Roubini said in an interview: “We are in a worse situation than we were in 2008. This time around we have fiscal austerity and banks that are being cautious.”
Roubini, known for his bearish views on the world economy, thinks that there is a 60 percent chance of a second recession imminently. Economic data of recent weeks presents a mixed picture.
On Thursday, the US government announced that jobless claims dropped by 11,000 to 409,000 last week. Friday's employment report in the US is expected to show a gain of only 75,000 nonfarm jobs during August, with the unemployment rate steady at 9.1 percent.
Recent surveys point to slumping business and consumer confidence across the developed world.
Asked if there was still a chance the developed economies could avoid recession, Roubini said: "That’s very optimistic if you look at the data."
"The hard economic data (which has come out recently) is all relevant to July while the soft data which has come out is for the future and that’s all moving in the wrong direction," he added.
He also believes that a third round of quantitative easing in the US may not have the desired long-term effects, and that further fiscal stimulus across Europe and the US will be needed.
"The market may rally but unless the real economic data moves with asset prices, then eventually asset prices are going to go," he said. "Last year the economic data was already improving when QE2 was introduced."
Europe has come into increasing focus in recent weeks, with some even questioning whether the single currency can survive this crisis.
Roubini believes there will eventually be an enlargement of theEuropean Financial Stability Facility (EFSF) or a common euro zone bond.
He thinks that the euro zone governments should try to weaken the value of the euro. The strength of the currency is worrying some economists because of the potential effect on exports from the euro region.
"Unless there is economic growth there will be this problem again,” said Roubini. “Fiscal austerity is negative for growth… (Governments) should work on denominated GDP not just on austerity."
He was pessimistic about the UK’s immediate economic future, and believes the British economy is "on the verge of a double dip."