(January 25, 2013) – Economist Nouriel Roubini added to the tone of cautious optimism emerging the World Economic Forum in Davos, calling circumstances “less worse than last summer in the Eurozone.”
Dubbed “Dr. Doom” for forecasting the financial crisis pre-2008, Roubini remarked in an interview with Bloomberg that tail risk has declined over the last six months. However, he stayed true to his nickname when discussing Europe’s job situation: “Look at the unemployment numbers in Spain today; [they are] rising even further. They are really shocking numbers. The fundamental problems in the Eurozone-the lack of growth, continued recession, debt sustainability, lack of competitiveness-remain.”
Roubini also spoke on a topic that’s been hot among the global elite gathered in the Swiss mountain town: international policy and regulation coordination. “We live in a balance of power,” he said, where conflicting goals and interests thwart agreements on fundamental economic and geopolitical issues.
“It is a more fragile economy because interdependence implies that problems are global, but policies are national. Coordinating among different countries will be increasingly difficult. It leads to political, economic and financial tensions like currency wars that can lead eventually into protectionism,” Roubini concluded.
This topic sparked debate yesterday during a high-profile session on “The Global Financial Context.”
Tidjane Thiam, Prudential’s group chief executive and former CFO, argued against global regulation initiatives by recounting the struggles over Solvency II.
Thiam said: “Take the example of insurance: we have Solvency II in Europe. It’s been going on for 11 years. Someone said, ‘Let’s come up with one solvency regime for 27 European countries.’ The only problem is, they forget these 27 different countries have 27 different starting points which they reach through their own history. The way insurance is distributed is completely different…If someone thinks that they can come up with one answer, one goal that is going to work for all of those 27 systems, so far it has failed.”
The World Economic Forum wraps up on Saturday, January 26.