American economist Nouriel Roubini and Ian Bremmer of Eurasia Group appeared on “Bloomberg Surveillance” on Wednesday, with Roubini providing head-scratching comparisons—to say the least—about Europe’s debt crisis; specifically, will Germany bail out other eurozone countries?
“The Germans say, ‘you lost your virginity,’” Roubini said, referring to the European Redemption Fund proposal now being debated. “You sign a contract. You say, ‘I’m a born-again virgin.’ Be abstinent for the next two years. Show me your soul and two years from now, we’re going to get married. But today, I commit to marriage today? Forget it.’”
Thankfully, his comments became easier to comprehend as the interview continued.
Roubini on how to get decisive action in the eurozone:
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“The European leaders already had 18 summits of the leaders in the past two years. The last summit, the newspaper headline was the leaders decided to postpone key decisions. Now there are 19 summits. Now they’re supposed to come up in one summit with a political union, with a banking union, with a fiscal union, with a transfer union, with a growth compact and resolve the problems that haven’t been resolved for years. Germans are wont to say no to European-wide deposit insurance.”
Bremmer’s view on global problems:
“First of all, I see that irrespective of whether you are a Democrat or a Republican in the United States, you are basically telling the Germans, ‘come on guys, you have to do something.’ But we’re not going to play a role in that. I look at the Chinese government despite that they are awash in liquidity right now. They’re not prepared to actually provide any concrete support for the Europeans, so the Europeans must do this themselves. We’re not going to act as the lender of last resort for the eurozone. At the same time, I see plenty of other global problems banging along where everyone is kicking the can down the road. The willingness to kick the can right now for the United States, Japan, Europeans, the Chinese, has been an elite motif really since 2008.”
Roubini on the persistency of real economic slowdown:
“It’s not just a slowdown. …The recession will become a depression. Output has fallen from the peak 15% in Greece. The same thing in Spain…This could become like Japan, but worse. Japan did not have a sovereign debt crisis because it was a net creditor country. But all of these countries are net debtors. They would be lucky to end up in stagnation like Japan. It’s getting worse, there’s already a sovereign debt crisis, a banking crisis, a balance of payment crisis, an economic crisis and all of those things together are getting worse.”
Roubini on German leadership: