MercoPress. South Atlantic News Agency

Currency unions do not survive “without fiscal and political union”

New York University professor Nouriel Roubini, or “Dr. Doom”

The New York University professor who anticipated the financial crisis cautioned about the Greek situation and the Euro zone saying history indicates that no currency union has survived without a strong fiscal and political union.

“Failure to take the tough decisions necessary would draw attention to an uncomfortable historical truth: that no currency union has survived without a fiscal and political union” said economist Nouriel Roubini.

He further anticipated that the European Union or the International Monetary Fund will probably have to offer financial assistance to Greece so that it will avoid default.

“I expect there is going to be eventually some financial support” Roubini said in a television interview in Moscow with Bloomberg.

That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to IMF to get an IMF package” added the economist who has also been nicknamed “Dr. Doom” for his forecasts.

Meanwhile, Greece should adopt a “credible fiscal plan heavy on spending cuts that government can control” rather than tax hikes and loophole closures that depend on “historically weak compliance”.

Nourini also referred to his main speech in Davos Economic Forum where he anticipated that the outlook for US growth remains “very dismal” in spite of the latest Commerce Department report showing an expansion of 5.7% in the fourth quarter.

“The headline number will look large and big, but actually, when you dissect it, it's very dismal and poor” said Professor Roubini, “we are in trouble”.

More than half that growth owed to replenishing depleted inventories and relied on monetary and fiscal stimulus, he said. As these forces ebb, the rate will slow to 1.5% in the second half of this year.

Roubini anticipates that US economy won’t relapse into recession but unemployment will rise from 10% at present amid “mediocre” growth.

“It's going to feel like a recession, even if technically we're not going to be in a recession,” he said.