Davos: Roubini says sovereign debt threatens world economy (MarketWatch) (26-01-2011)

DAVOS, Switzerland (MarketWatch) — As the World Economic Forum’s annual meeting got underway in Davos, economist Nouriel Roubini iterated his concerns about the threat the euro zone’s ongoing sovereign-debt crisis continues to pose to the global economy, although he believes that overall risks are balanced as emerging markets continue to lead growth.

In the same panel discussion, Zhu Min, special adviser to the International Monetary Fund and former deputy governor of the People’s Bank of China, said he worried that U.S. stimulus measures focused on demand ran the risk of pushing the world back to the “old normal” of the United States serving as the world’s consumer, hampering efforts to shift China’s economy from a model focused on exports to a model that incorporates more domestic consumption.

Roubini said that food and commodity price inflation, which is a negative for consumption, particularly in emerging economies, is a concern, while, growth in most advanced economies remains below trend and is unlikely to grow more quickly as households continue to “deleverage,” or pay down debts.

on the upside, emerging markets are showing an acceleration of growth beyond heavyweights China and India, while risks of a double dip or outright depression have faded — even counting Britain's unexpected fourth-quarter contraction in gross domestic product, he said.

On the euro zone, Roubini acknowledged that markets have appeared more optimistic in recent weeks over efforts to resolve the crisis, but warned that “fundamental problems of the euro zone remain unresolved.”

Source: MarketWatch