Dr Doom warns of 50% chance of global recession

Economist Nouriel Roubini believes the unresolved debt crisis in Europe has resulted in more than a 50% chance of a worldwide recession.

Speaking at the Commonwealth Business Forum investor conference in Australia yesterday, perma-bear Roubini said the question remains whether the recession will be mild or severe, depending on how quickly politicians step in to recapitalise Europe's indebted banking system.

"In my view, there is a significant probability of more than 50% that over the next 12 months, there is going to be another recession in most advanced economies," said Roubini.

"If we are asking ourselves whether the recession in advanced economies is going to be mild or whether it will be severe, the answer very much depends on whether the eurozone is able to control its own crisis, if it does then the recession will be relatively mild."

He added a recession could potentially trigger a series of hard defaults, in turn leading to a break-up of the eurozone.

"If the situation in the eurozone becomes disorderly, with defaults by a number of countries, this could lead to a disorderly exit of a number of members of the eurozone.

"Potentially this will result in a break-up, and the shock could be as large, if not larger, than the disorderly collapse of Lehman Brothers in the fall of 2008."

Roubini, earned the title ‘Dr Doom' after correctly predicting the collapse of the US sub-prime housing market which triggered 2008's financial crisis.

Earlier this year he predicted the eurozone will break up within five years.