European Union ministers agree to emergency aid worth 500 billion euro to prevent Greece's debt crisis causing turmoil in other euro zone states.
Commenting on the same, Nouriel Roubini of RGEMonitor.com said Greece needs to raise taxes, cut spending. "This financial crisis was cause by excessive leverage and net accumulation in the private sector, households, financial institutions, and even corporate sectors in some countries. While there is a lot of talk about deleveraging those private debt ratios, which are now at very high levels, there has been massive delevaraging of the public sector."
He sees the risk of contagion spreading to US and Japan. A deficit of 3% is not sustainable in the US, he added.
Roubini sees the need for massive fiscal contraction by the European Union. "These deficits are unsustainable even if you restructure debt. You need to accelerate structural reforms to let these economies grow."
He feels the European Central Bank (ECB) has made a few mistakes. "They even had a chance yesterday of doing something probably to restart this refinancing system." ECB, he feels, should have begun quantitative easing. "They could have restarted the kind of things that are leading to a liquid squeeze in the interbank markets. They did the mistake of not doing it and that is one of the triggers of market nervousness."
