The economist known as “Dr. Doom” for his 2008 recession prediction says the world may be headed for another financial crisis.
New York University professor Nouriel Roubini said Wednesday that Europe’s debt troubles are so profound that the continent is falling into a “recession that will get worse and worse.”
And a deep recession likely will lead to another financial panic that could spread around the world — an outcome that will be ” very painful,” he said.
Roubini spoke at a conference called, “U.S. Economy at Risk: What Can Be Done?,” sponsored by the New American Foundation, a research group.
He is just back from Europe, where he says the debt crisis is reaching its climax. But he is not looking for a happy ending.
Government austerity programs, higher unemployment and reduced business and consumer confidence will combine to cut growth for at least two years, he says.
On Friday, European leaders will meet at a Brussels summit to establish a long-term commitment to defuse their debt bomb, restore fiscal credibility and save the euro as the currency of 17 European nations.
Roubini predicts Europe’s leaders “will reach something of a compromise, but it won’t be sufficient” to solve the problem of too much government debt.
They will agree that “fiscal austerity and reforms will be necessary,” but those changes will only depress growth, leading to lower tax revenues and a deepening debt crisis. Eventually, investors in some European bonds “will see they are insolvent,” he said.
“With Italy too big to fail, too big to save, and now at the point of no return, the endgame for the eurozone has begun,” Roubini said in a recent written assessment.
He says a disorderly eurozone break-up would trigger a financial system shock as serious as the collapse of Lehman Brothers in 2008, if not worse.
Besides teaching, Roubini is chairman of Roubini Global Economics and co-author of the book “Crisis Economics.”
(Marilyn is a senior business editor for NPR.)