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Opinion

The Changing Face of Global Risk

By Nouriel Roubini

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... as the risks of recent years have receded, six other risks have been growing.

The world’s economic, financial, and geopolitical risks are shifting. Some risks now have a lower probability – even if they are not fully extinguished. Others are becoming more likely and important.

A year or two ago, six main risks stood at center stage:
  • A eurozone breakup (including a Greek exit and loss of access to capital markets for Italy and/or Spain).
  • A fiscal crisis in the United States (owing to further political fights over the debt ceiling and another government shutdown).
  • A public-debt crisis in Japan (as the combination of recession, deflation, and high deficits drove up the debt/GDP ratio).
  • Deflation in many advanced economies.
  • War between Israel and Iran over alleged Iranian nuclear proliferation.
  • A wider breakdown of regional order in the Middle East.
These risks have now been reduced. Thanks to European Central Bank President Mario Draghi’s “whatever it takes” speech, new financial facilities to stabilize distressed sovereign debtors, and the beginning of a banking union, the eurozone is no longer on the verge of collapse. In the US, President Barack Obama and Congressional Republicans have for now agreed on a truce to avoid the threat of another government shutdown over the need to raise the debt ceiling.

Read full article as published in Project Syndicate.

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Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.