Roubini_EZ

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Latest Posts Archives Contact RSS Next Why Italy’s Days in the Eurozone May Be Numbered Previous Nouriel Roubini’s 2006 Speech at Davos-WEF Warning That Italy and PIGS May Experience Debt Crisis and EZ Break-Up in 5 years; and Tremonti’s Reaction to the Speech About Posts from Nouriel Roubini from his writings, commentary and media appearances. Profile Nouriel Roubini is cofounder and chairman of Roubini Global Economics, a global macroeconomic and market strategy research firm. More Books “Crisis Economics: A Crash Course in the Future of Finance†?   (Penguin Press, 2010). Books “Bailouts or Bail-Ins: responding to Financial Crises in Emerging Markets†?   by Nouriel Roubini and Brad Setser Blogroll Roubini Global Economics
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Eurozone Crisis: Here Are the Options, Now Choose Author: Nouriel Roubini · November 9th, 2011 · 261151http%3A%2F%2Fwww.economonitor.com %2Fnouriel%2F2011%2F11%2F09%2Feurozone-crisis-well-at-least-we-have-options %2FEurozone+Crisis%3A+Here+Are+the+Options%2C+Now+Choose2011-11- 09+02%3A26%3A14Nouriel+Roubinihttp%3A%2F%2Fwww.economonitor.com%2Fnouriel%2F%3Fp %3D261151 Share This Print The announcement of the most recent EZ rescue package (acceptance of a bigger haircut for Greek private creditors, the recapitalization of EZ banks and the use of guarantees and financial leverage in the hope of preventing Italy and Spain losing market access) led to markets rallying for a day as the tail risk of a disorderly situation in the EZ, temporarily, diminished. By the next day, Italian yields and spreads were still close to their high, serving as a reminder—as we argued in “ The Last Shot on Goal: Will Eurozone Leaders Succeed in Ending the Crisis? ,†?   co-authored with Megan Greene—that the EZ’s fundamental problems will not be resolved by this trio of policy actions. To put the latest package in context, we need to first assess the fundamental problems facing the EZ and the potential scenarios for the monetary union. EZ Flow Problems The EZ suffers from both stock and flow problems, which are related to each other. The flow problems were and/or are: Large fiscal and current account deficits in most members of the EZ periphery (Greece, Ireland, Portugal, Cyprus, Spain and Italy); Economic weakness, manifesting itself in renewed near recession or outright recession and weak actual and potential growth; The periphery’s long-term loss of competitiveness, driven by three factors: Loss of export market share to emerging markets (EMs) in traditional labor-intensive low-valued-added sectors; real appreciation, driven by wages growing more than productivity since the inception of the EZ; and the relative strength of the value of the euro in the past decade. EZ Stock Problems
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