CNBC — Europe will see a recession this year and Portugal is likely to follow in Greece’s footsteps as the country struggles with high borrowing costs, according to the Managing Director of Market Research and Strategy at Roubini Global Economics.
“We’re going to get a recession this year but it will be milder than it would have been. The European Central Bank has done an awful lot without which we’d be in a banking crisis. It has bought banks a lot of time, between 18 months to three years,” Arnab Das told CNBC.
Das works alongside Nouriel Roubini, the renowned economist dubbed Dr Doom for predicting the financial crisis of 2008.
However, he said while the ECB’s Long Term Refinancing Operation (LTRO) had dealt with liquidity issues it did nothing to address the deeper rooted problems affecting the euro zone.
“A lot of people are already asking, what about after LTRO? It’s been entirely about liquidity.
There has been nothing about solvency of banks or the capitalization of banks and that’s what liquidity can’t solve,” Das said.
He added that the contagion to other countries was still a risk for the euro zone.
A number of analysts have argued that the austerity measures implemented in a number of other struggling euro zone economies could mean the bailout story does not end with Greece.
“Our view is that Greece is done, Portugal is coming and also Ireland. We will see more orderly debt restructuring within the euro zone as long as it’s not part of the ‘too big to fail’ economies like Italy and Spain,” Das added.
He also said that the U.S. had managed its deleveraging process for its banking industry far better than the euro zone had.
“We are going to be in a bank deleveraging mode and leveraging in Europe is much worse than in the U.S. Europe will have a tough time overall.
We’ve averted the worst financial crisis in history but have not solved the core issues yet,” Das added.