2012.06.11 17:05:03 Oil Little Changed As Dollar Gains Vs Euro

By Nirmala Menon

MONTREAL--Spain has a "fighting chance" to avoid a sovereign bailout
with the banking rescue negotiated over the weekend, according to Mark
Zandi, chief economist of Moody's Analytics.

"I think they have at least even odds of doing that - of stabilizing
the economy and avoiding a bailout," Zandi said in an interview on the
sidelines of an annual economic conference in Montreal.

The economist said the rescue of Spain's banking system is also a
"partial road map for trying to help the Italian banks and other banks
in Europe as well."

Mr. Zandi said that, although Italy's economy is also struggling, its
borrowing needs are much lower and its private sector is in good shape
in terms of debt.

"I think Italy has better-than-even odds of making their way through
this without stumbling," he said.

But Mr. Zandi said European leaders should ease up on fiscal austerity
demands imposed on troubled euro-zone nations because they're
counterproductive.

"It's pushing countries like Greece and Spain - perhaps even Italy -
in a way that's not helping anyone's cause," Mr. Zandi said.
Governments have to get deficits down and return to balanced budgets,
"but if you try to do it too quickly, it's just not going to work," he
said.

If Greece exits the euro zone, "it would probably mean another global
recession," Mr. Zandi said. "You could easily construct that scenario
if Greece exit results in contagion effects," he added.

Mr. Zandi said the U.S. economy is on "solid ground" and will be able
to "weather this storm pretty well." Growth isn't "taking off, but
we're going to see north of 2% growth," he said.

He said soft U.S. employment data that roiled markets recently are a "blip."

"Certainly job growth slowed fundamentally from the earlier part of
the year, but not nearly as much as the data suggests," Mr. Zandi
said. "We'll see better data."

Mr. Zandi said the so-called "fiscal cliff" is a key challenge "but I
think we'll nail that down."

Write to Nirmala Menon at nirmala.menon@dowjones.com


(END) Dow Jones Newswires

June 11, 2012 11:06 ET (15:06 GMT)