I don't think we ever left recession in 2008, says Expert

Excerpts from Your World at 10 on CNBC-TV18 Watch the full show »

Q: What do you expect to see in the US over the course of the next month, six months both in the case of economic as well as how markets react to that data?

A: A lot of business people in the US just say their sales are not growing very fast and they are seeing 1-2% sales growth. They can buy an iPad instead of hire more workers. And that's what they are doing, that's what you are seeing in the jobs numbers. I don't think that dynamics going to change anytime soon.

We likely are to have moderate growth, 1-2%. It is very unlikely that it is going to be tonne better than that. There is some chance, if Europe goes to the worse, that it could be bad.

The most likely scenario is the modest growth. Maybe sometime next year, if Europe stabilises, sentiment will pickup, maybe Congress will pass some kind of tax cuts, maybe the Fed in 2012 exasperated will do something despite the Republican pressures. But it is still a very shaky situation.

Q: You were at the IMF meetings and the World Bank's meetings just a few weekends ago. What do you make of the situation in Europe?

A: Market seems to be overjoyed every time they find out the world is not ending today in Europe. So, it doesn't take much to make them happy, they are so scared. I think the Europeans have certainly become more energised and moving towards something better. But I think they are still nowhere near the end of this.

I suspect they are coming close actually to cutting the cord on Greece, not so much rescuing it and then trying to protect everybody else. But Portugal has problems, Ireland has problems. You have to draw line in the sand, but it has to be in a realistic place and they just haven't got there yet. Their political system requires unanimity and some decisions make it hard also. So, I think markets well hear news which cheers them for a month or two, but it's still a long way from the end.

Q: You said that you think Europe is coming closer to cutting the cord on Greece. It could be an orderly default, it could be a disorderly default. Do you think Europe is going to get worse before it gets better or do you think it's going to muddle along for the next six-eight months before it finds a solution to breakout this deadlock?

A: No, it is not going to find a solution to breakout of the deadlock, until things gets much worse. That's the unfortunate reality. If you live in Germany things just aren't that bad yet. The chancellor just doesn't have the political power to take the dramatic steps towards the fiscal union that they really need to take. So, I am afraid it is still ways off the solution in Europe. And that is not to say there won't be moments of cheer from markets as they get thrown here and there.

Q: Are you in favour of orderly default with regards to Greece or do you believe that it is very difficult to visualise what the outcome could be, just like we couldn't quite visualise what Lehman would do to us?

A: There isn't going to be an orderly default for Greece. But the rest of Europe has to be protected, when it happens. They have to decide what they are going to do. If they had done it a year ago, it would have been a lot easier.

They need to have a firewall and they need to decide where to place it. All those pieces need to be decided and in place as Greece goes. Greece default is just a matter of semantics. They are not repaying money now and nobody seriously believes they are going to, the questions when they are just going to pull the plug on the whole thing.

Q: How do you assess the chances of contagion?

A: There is 100% contagion. But the Europeans need to back the other countries. They have to stop cascade of bank loans in Italy and Spain. If they do that then it will be manageable.