Roubini recommends that Italy restructure its debt in order to avoid a default payment. With a volume equal to 120% of their GDP, the country?s increasing financial burden, slack growth and spending cutbacks could spark a recession.
The situation is unsustainable because of liquidity shortages. And the impact for an entrenched EU could easily cause a collapse. Therefore, Monti only has two options.
Either assume that Italy will fail and continue taking the guru?s advice by letting the euro be compromised by the systemic character of Italy or convince the markets and Merkel that the country can adopt a new budget without sacrificing growth. The second option would be a Herculean effort that could require adjustments via deflation.
Italy has the ability to change, but it needs to show some desire to do so and find the necessary cash as well.
