With borrowing costs for the euro zone’s peripheral nations rising and a battle over growth versus austerity set to dominate politicians' attention, two leading contrarians have taken aim at the current policy response.
Nouriel Roubini, an economist and founder of RGE Monitor used a series of tweets on Tuesday evening to call for action on weakening the euro.
“If domestic demand is going to be anemic and weak in this fiscal adjustment because of private and public sector deleveraging you need net exports to improve to restore growth,” wrote Roubini who believes much looser monetary policy is needed. “In order to have an improvement in net exports you need a weaker currency and a much more easy monetary policy to help induce that nominal and real depreciation that is not occurring right now in the euro zone,” said Roubini.
“That’s one of the reasons why we’re getting a recession that’s even more severe,” he said.