Nouriel Roubini, the chairman of Roubini Global Economics known also by his popular nickname “Dr Doom”, has warned the eurozone will break up if it fails to find a more radical solution to its current problems.
Writing on the Financial Times website, Roubini argues that a lack of discipline in countries such as Greece and Portugal has caused them to lose their competitiveness. Spain and Ireland remain plagued by the end of their financial bubbles, he says.
Core taxpayers are unlikely to accept “the taxes of German (and other core) taxpayers are not backstopping only their country’s debt but also the debt of the members of the periphery”, warns Roubini.
The solution is to leave the euro and return to national currencies “and achieve a massive nominal and real depreciation”.
Roubini recognises the inconceivable nature of such a suggestion but recognises that might not be the case five years down the line.
Roubini also reiterates his prediction that some eurozone government debt will have to be restructured. Yesterday saw Standard & Poor’s downgrade Greece to CCC – the worst sovereign rating in the world.
In a statement, S&P said: “In our view, Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece’s official creditors, would result in one or more defaults under our criteria.”