Euro zone faces zero growth -Roubini to paper

* Says euro zone could face another recession – Swiss paper

* Says second financial crisis possible

* Europe faces mid-term deflation risk

GENEVA, June 5 (BestGrowthStock) – The euro zone is facing a period
of zero growth if not recession, and the United States is
heading for financial trouble, U.S. economist Nouriel Roubini
was quoted as saying on Saturday.

There was a risk of renewed recession in Europe, Roubini
said in an interview with Swiss daily Tages-Anzeiger.

“There is that risk, at least for the euro zone. Growth will
fall towards zero. Even if that is perhaps not a real recession,
it will feel like one. Greece was just the tip of the iceberg,”
he said.

“And the Americans too will run into the wall at some point
if the carry on the way they are,” he said in the interview
published in German.

Roubini, known as Dr. Doom and best known for predicting the
U.S. housing crisis, said there was a risk of a second financial
crisis, with countries becoming insolvent and being forced out
of the euro, and banks collapsing.

Countries such as Spain and Greece were now under pressure
to cut spending and raise taxes to retain access to the capital
markets, even though they had no growth to speak of.

If governments implement austerity measures too soon they
risk snuffing out demand and recovery, but delays could provoke
a catastrophe with high interest burdens and inflation.

“You’re damned if you save and you’re damned if you don’t,”
he said.

Roubini said it was “possible to square this circle” if
governments committed to a credible medium-term plan to restore
their budgets.

But such policies, which carry the risk of a deflationary
recession, must be compensated for with a loose pan-European
monetary policy to stimulate demand.

Any resulting further decline in the euro would make
European exports more competitive and allow Germany to raise
wages and purchasing power at home to stimulate exports from
other euro zone countries, he said.

Roubini said that a Japanese-style period of deflation,
stagnation and high unemployment was a much greater risk to
Europe for the next two or three years than inflation.

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(Reporting by Jonathan Lynn; editing by John Stonestreet)

Euro zone faces zero growth -Roubini to paper