Bloomberg Video: Roubini, Greece Must Restructure Sovereign DebtMay 14th, 2010 | By Rob | Category: DS Feature, DS Video
In plain English and within the scope of Econ 101, the infamous Nouriel Roubini weighs in on the recently announced $1 Trillion EU debt purchase backstop; discounting its potential for success and identifying roadblocks that may lead to failure.
Specifically, Roubini states that despite the “money on the table”, the following three headwinds oppose a return of normalcy in the European Union’s debt markets.
1.) It has been, and will continue to be, politically arduous for nations to enforce the austerity measures required for eligibility under the plan.
2.) Raising taxes and cutting costs will cause nations to enter recession in the near term (i.e. 1-2 years at minimum).
3.) The rising value of the Euro from 2000 to 2008 has made Eurozone states increasingly less competitive, and has led to ballooning current account deficits.
Newly appointed president Papandreou has redacted promises of pay hikes, due to the looming risk of default and spiking bond yields, and instead has announced plans to cut pensions, jobs, and benefits across the board, to the tune of 10% of GDP. It is for reasons such as these, that Roubini goes on to predict a restructuring of debt in Greece, where riots foreshadow the fleeting success of the hard-lined austerity measures.
Enjoy the analysis below, straight from the horse’s mouth…
Roubini has become more public in the recent resumption of volatility and uncertainty in Europe, as main stream business media seems to be returning to the “man with a plan”, who predicted the recession very accurately during the decline in 2008, and has since maintained a stance that more pain has yet to come.
The interview with Roubini below gives a more detailed analysis of the situation in Greece, only days before the $1 trillion dollar EU plan was announced…
We at Diamond Slice agree with Roubini, that Greece will be unable to avoid a debt restructuring, and suggest that following the prices of Gold, EU Sovereign CDS spreads, and EU Sovereign Bond Yields will paint the clearest picture of sentiment surrounding the situation.
Are we smoking something illegal here or do you agree with our slice of the issue???
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