Greek crisis is ‘tip of iceberg’ in Euro Region, Roubini says

Date: Thursday, May 20, 2010
Author: Canada.com

The crisis engulfing the euro area is not over yet as Greece remains the “tip of an iceberg,” New York University professor Nouriel Roubini said.

“It’s not over,” Roubini said in an interview with BBC radio broadcast today. “What we’re facing right now in the eurozone is a second stage of a typical financial crisis.”

The European Union’s 750 billion-euro ($931 billion) rescue package to stop contagion from Greece hasn’t calmed the markets while questions remain about whether governments are strong enough to implement the austerity measures required, Roubini said.

The European Union said today it has transferred the first instalment of emergency loans to Greece, one day before 8.5 billion euros of bonds come due.

Markets remain concerned about the solvency of some European countries as there is “significant economic and financial trouble in the eurozone,” Roubini told the BBC’s “Today” program. The recent riots in Greece in response to fiscal cuts have fueled doubts about some European governments’ ability to solve these problems, he said.

“There’s a question mark whether we can be confident the government is going to be strong enough to do the fiscal austerity,” Roubini said. “If these packages of austerity are going to be implemented markets are going to stabilize.”

Roubini also said the U.K.’s new Conservative-Liberal Democrat coalition government has yet to be tested. The government will spell out how it plans to cut Britain’s record deficit in an emergency budget on June 22.

"We’ll see when things are going to have to happen, when the tough decision is going to have to be made on revenues, on spending, whether that coalition is going to remain strong or not,” he said.