The risk of a hard landing in China, fears over tapering in the US and
the ongoing tensions in Crimea show that there is no room for
complacency, writes Nouriel Roubini
The world's economic, financial, and geopolitical risks are shifting.
Some risks now have a lower probability – even if they are not fully
extinguished. Others are becoming more likely and important.
A year or two ago, six main risks stood at centre stage:
• A eurozone breakup (including a Greek exit and loss of access to capital markets for Italy and/or Spain).
•
A fiscal crisis in the United States (owing to further political fights
over the debt ceiling and another government shutdown).
• A public-debt crisis in Japan (as the combination of recession, deflation, and high deficits drove up the debt/GDP ratio).
• Deflation in many advanced economies.
• War between Israel and Iran over alleged Iranian nuclear proliferation.
• A wider breakdown of regional order in the Middle East.
These
risks have now been reduced. Thanks to European Central Bank president
Mario Draghi's "whatever it takes" speech, new financial facilities to
stabilise distressed sovereign debtors, and the beginning of a banking
union, the eurozone is no longer on the verge of collapse. In the US,
President Barack Obama and Congressional Republicans have for now agreed
on a truce to avoid the threat of another government shutdown over the
need to raise the debt ceiling.
In Japan, the first two
"arrows" of prime minister Shinzo Abe's economic strategy – monetary
easing and fiscal expansion – have boosted growth and stopped deflation.
Now the third arrow of "Abenomics" – structural reforms – together with
the start of long-term fiscal consolidation, could lead to debt
stabilisation (though the economic impact of the coming consumption-tax
hike is uncertain).
read more : http://www.theguardian.com/business/2014/apr/02/financial-markets-risks-to-global-economy-nouriel-roubini
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
