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Nouriel Roubini: Raising taxes on short-term could trigger negative effects in economy

Raising taxes on short term could trigger negative effects, which could result in prolonging the recession, American economist, Nouriel Roubini, who was among those experts who had anticipated the current global downturn, told the Financial Forum in Bucharest.

Raising taxes on short term could have negative effects, which could prolong the recession. If the GDP falls, then we can end in a vicious circle, said Roubini. According to the American economist, the sums borrowed by the emerging states are not sufficient to help them out of the economic crisis, with financial reforms being also needed.

The money are not sufficient, there is need of financial reforms too. The money come with a number of conditions, and governments must take some austerity measures. Nouriel Roubini questioned the governments having enough power to impose the fiscal austerity measures.

As the special guest of the Financial Forum in Bucharest, Roubini underlined that the euro area countries, even if they are emerging economies, they still have a problem in terms of competitiveness.

The euro area countries look like emerging economies, even if they borrow in their own currency. The Greece market seems an emerging market, needing a restructuring of its public debt. In my opinion, wages grew more than productivity, which led to increasing current account deficit. The euro area has problems of competitiveness, not only of deficit. Competitiveness must be retrieved, Roubini highlighted.

The American economist also showed that today we can speak of an atypical recession, which led to deficits up to 10 percent of GDP in many countries. This was not a typical recession, but rather a balance sheet recession. In the U.S., Iceland, UK, people used their homes as ATMs. Now, we have shortages of 10 percent of GDP in many countries, not only in Greece. The average will double compared with the latest years, Nouriel Roubini explained.

He also added that the current financial crisis has not passed and that now comes the second part of the recession, while in terms of residential investments there is expected a drop because of the overcapacity in this sector.

According to Agerpres, Nouriel Roubini is Professor of Economic Sciences and International Affairs at New York University Stern School of Business.

Romania had economic contraction below EU expectations

American economist Nouriel Roubini, present in Bucharest, considers that the austerity measures in times of crisis must be taken in a progressive manner and said that Romania had an economic contraction below the European Union expectations.

Romania's contraction and economic recovery was worse than the EU expected, even though the international community proved flexibility to support the countries in the region, underlined the American economist, dubbed Mr. Doom.

In his opinion, it is up to the political system to decide the most adequate solutions and the dialogue must be organized in every country. He also views as important the fact that these measures are not applied too suddenly, but gradually, in order to regain population's trust.

I think that every country with a very wide budget deficit must reduce it. The austerity measures must be taken progressively and must be accompanied by other financial and long-term measures, said Roubini.

Asked what he thought about the Government's plans to cut all pensions in Romania by 15 percent, Roubini pinpointed that all aspects related to social equity must be discussed at political level.

The need of fiscal austerity cannot be changed. The International Monetary Fund is aware of these restrictions and that the tough measures, suddenly adopted, will affect the country. The social equity aspects must be discussed at political level. Each country should discuss these aspects, said Roubini.

Sursa: http://www.actmedia.eu

Tags: roubini financial economist economic measures countries american austerity recession taxes raising short could effects negative nouriel euro

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