Forget Portugal, Says Roubini — Worry About Spain

As Greece and Ireland flounder in Europe, many analysts are turning their gaze to Portugal, the PIIG nation deemed most likely to follow suit. Economist Nouriel Roubini isn’t worried about Europe’s twelfth most populous country, however; he’s more concerned with Portugal’s larger next door neighbor, Spain.

“I think the big question is not Portugal — that is too small — but rather whether the contagion could spread, over time, to Spain, a country that is on one side too big to fail, but from the other side too big to be saved,” he said late last week on Bloomberg’s The Pulse.

Citing fundamental risks in unemployment, housing, Spain’s financial system and the country’s ability to compete with its EU counterparts, Roubini pinpointed the nation as a situation worth attention as barometer of the spread of European contagion.

Spain will have to make hard choices in order to shield itself from contagion, according to Roubini, including accelerated structural reform and enforcing fiscal austerity.