November 10th, 2011
06:40 AM GMT
(CNN) – With the flood of woeful financial news coming out of Greece and Italy, it’s easy to forget something Goldman Sach’s Jim O’Neill is quick to point out – the world doesn’t depend on Greece and Italy.
“This year the increase in China’s GDP will be the equivalent of creating three new Greek economies. The increase in the BRIC countries GDP’s –that’s China along Russia Brazil and India – will be close to the equivalent of creating another Italy,” said O’Neill, who coined the term BRIC to refer to the developing economic titans of Brazil, Russia, India and China.
“So yes, we’ve got enormous problems in the core of the developed world, but that isn’t the modern global economy. The world will probably grow by close to 4% next year despite the fact that the euro might be in recession.”
“In my judgment, first of all the U.S. is not heading for a double dip, the US economy actually recently has positively surprised many expectations and I think it’s going to be stuck with 2-3 percent growth for quite some time,” he said.
Still, the Italy crisis is taking the world into “new and dangerous territory.”
“The European financial system and to some extent the world’s economy and markets can’t cope with Italy blowing up in the same way Greece did,” O’Neill said.
“In Europe, the areas that have been in trouble until now, are all small economies, but Italy is a biggie,” he said. “The policymakers have to do something to get Italian bond yields back down. Or there are going to be consequences for everybody else both in Europe and elsewhere, whether it be the emerging markets or the rest of the developed world. So what happens involving European policymakers with Italy here is absolutely crucial.”
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