https://www.spiegel.de/international/business/nouriel-roubini-on-coronavirus-this-crisis-will-spill-over-and-result-in-a-disaster-a-e811cf3b-d495-4c52-bf79-d872c8f164ac
DER SPIEGEL: How severe is the coronavirus outbreak for China and for the global economy?
Roubini: This crisis is much more severe for China and the rest of the world than investors have expected for four reasons: First, it is not an epidemic limited to China, but a global pandemic. Second, it is far from being over. This has massive consequences, but politicians don’t realize it.
DER SPIEGEL: What do you mean?
Roubini: Just look at your continent. Europe is afraid of closing its borders, which is a huge mistake. In 2016, in response to the refugee crisis, Schengen was effectively suspended, but this is even worse. The Italian borders should be closed as soon as possible. The situation is much worse than 1 million refugees coming to Europe.
DER SPIEGEL: What are your other two reasons?
Roubini: Everyone believes it’s going to be a V-shaped recession, but people don’t know what they are talking about. They prefer to believe in miracles. It’s simple math: If the Chinese economy were to shrink by 2 percent in the first quarter, it would require growth of 8 percent in the final three quarters to reach the 6 percent annual growth rate that everyone had expected before the virus broke out. If growth is only 6 percent from the second quarter onwards, which is a more realistic scenario, we would see the Chinese economy only growing by 2.5 to 4 percent for the entire year. This rate would essentially mean a recession for China and a shock to the world.
DER SPIEGEL: And your last point?
Roubini: Everyone thinks that policymakers will react swiftly but that’s also wrong. The markets are completely delusional. Look at fiscal policy: You can do fiscal stuff only in some countries like Germany, because others like Italy don’t have any leeway. But even if you do something, the political process requires a great deal of talking and negotiating. It takes six to nine months, which is way too long. The truth is: Europe would have needed fiscal stimulus even without the corona crisis. Italy was already on the verge of a recession, as was Germany. But German politicians aren’t even thinking about stimulus, despite the country being so exposed to China. The political response is a joke - politicians are often behind the curve. This crisis will spill over and result in a disaster.
