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Euro Union in danger : Roubini

Thu 28th Jan 2010

Nouriel Roubini has never been more pessimistic about the future of European monetary union "Down the line, not this year or two years from now, we could have a break-up of the monetary union" the New York University professor said in an interview yesterday.

Professor Roubini's concern contrasts with that of European Central Bank president Jean-Claude Trichet who said it was "absurd" to imagine that the 16-nation zone could fragment.

Speculation of the break-up of the Euro currency has mounted as Greece struggles to cut the continent's biggest budget deficit and countries from Spain to Ireland face rising debt burdens, "The euro zone could drift essentially with a bifurcation, with a strong centre and a weaker periphery and eventually some countries might exit the monetary union," said Roubini. "This is the very first test" of the single currency bloc.

Membership in the euro means countries can no longer devalue a currency to export their way out of recession.

Greece's budget deficit ran more than four times the EU limit of 3 percent of gross domestic product (GDP) last year.

Roubini said Spain might eventually pose a bigger threat to the euro zone because it was the region's fourth-largest economy and had higher unemployment and weaker banks. Spain's jobless rate is more than 19 percent, almost twice the EU average.

"If Greece goes under that is a problem for the euro zone," he said. "If Spain goes under it is a disaster."

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