Greece heads for ‘severe recession’

Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said yesterday Greece will suffer a «severe recession» this year due to the downturn in the tourism and shipping sectors. The country is paying the price of having let its competitiveness slip and delaying the implementation of major reforms in fields such as the social security system and the labor market, he told a conference in Athens. Greece no longer has any room to further delay reforms that will increase productivity and improve its fiscal health, and helping in turn promote convergence with the eurozone, underscored the economics professor. Greece’s economy is estimated to tip into recession this year for the first time since 1993, according to the European Commission. The Greek government has admitted it will miss its growth forecast of about 1 percent for 2009 but has yet to make public its new estimate. The professor, who predicted the global crisis in 2006, said the risks to the Greek economy are linked to its exposure to Southeast Europe, which has been hit hard by the credit crisis. Even though public debt is at very high levels and borrowing costs have risen, Greece will be able to meet its obligations, said Roubini. But this situation will not be able to continue for very long, he stressed. Turning to international energy markets, Roubini said crude oil prices will likely rise to $100 a barrel again in 2010. «In my estimate, oil prices will reach $100 a barrel next year,» Roubini said. «Oil prices have increased too much and too soon mainly because of high liquidity. If oil prices go close to $100 by the end of the year, it will be a negative shock for the global economy that will slow the recovery,» he said. Crude oil for July delivery gained as much as 97 cents to $72.30 a barrel in electronic trading on the New York Mercantile Exchange yesterday.