(Updates with Spence comments in second paragraph.)
Oct. 21 (Bloomberg) -- Europe may need $2 trillion in its rescue fund to fight the debt crisis, more than the 940 billion euros ($1.3 trillion) that governments are said to be seeking, said Michael Spence, the Nobel Prize-winning economist.
“The Europeans have to make a real commitment to provide resources to stabilize the situation,” Spence, a professor at New York University and a Nobel laureate in economics, said in an interview with Bloomberg Television in Hong Kong today. He said the most likely outcome is there will be “very difficult, slow growth” in Europe and the U.S.
European governments may make the 940 billion euro available by combining the temporary and planned permanent rescue funds, said two people familiar with the discussions. Global stocks have swung between gains and losses on speculation Europe will struggle to resolve the looming threat on global economy.
Apart from the fiscal bailout package, policy makers in Europe need “a commitment to recapitalize the banks” and “the European Central Bank’s stamping on contagion” to overcome the crisis, Spence said.
The chance the global economy will slip into a recession is “a bit less than 50 percent” as there is a “better than 50/50 chance Europe will resolve” the crisis, said Spence, academic board chairman at the Fung Global Institute, a think-tank funded by William and Victor Fung, who run the world’s biggest supplier of clothes and toys, Li & Fung Ltd.
--With assistance from James G. Neuger in Brussels. Editor: Ken McCallum, Cherian Thomas
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