Nouriel Roubini,
Professor of Economics and International Business, Stern School of Business, New York University
Moderator:
Komal Sri-Kumar, Group Managing Director and Chief Global Strategist, TCW Group Inc.; Senior Fellow, Milken Institute
The eurozone is facing the first major test of its viability, said noted economist Nouriel Roubini, and the probability of a breakup is rising.
This session on the Eurozone seemed ripped from the headlines, coming on the same day that Greek debt was sharply downgraded, setting off concern throughout not only Europe but the world's capital markets.
A panel of experts convened to analyze the scope of the problem. Europe is staring down the unpleasant prospect of a major bailout — and perhaps further bailouts to come if the crisis spreads to throughout the PIIGS. Panelists focused on what kind of response is needed, the political pressures, the likelihood of peripheral countries enacting sufficient structural reforms and prospects for the long-term viability of Europe's monetary union. Jim McCaughan of Principal Global Investors praised Angela Merkel's handling of the crisis to date.
Time is of the essence, as the markets are losing patience. Roubini highlighted the urgency, noting the contagious effects of a disorderly collapse of the Eurozone or even Greece alone would be huge. The debt crisis has to be contained, one way or the other.
"While Greece is not too big to be allowed to fail — it's only 3 percent of Eurozone GDP — it′s too interconnected to fail," said Roubini. "Lehman was a $160 billion debt problem; Argentina was a $100 billion debt problem. But Greece is a $400 billion debt problem, three-quarters of which is held by non-residents, and therefore the contagious effects would be greater than Lehman."
Don't miss the video of this discussion — it captures the context needed to understand the implications of this week's rapidly unfolding events.
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