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Tuesday, 27 May 2008

US recession still probable: Greenspan

LONDON - A RECESSION in the United States remains a probability, former Federal Reserve chairman Alan Greenspan said in an interview published on Tuesday.
Speaking to the Financial Times from Washington, Mr Greenspan said he believed 'there is a greater than 50 per cent probability of recession'. He noted, however, that 'that probability has receded a little'.

The likelihood of a severe recession had 'come down markedly', he added: but it was too soon to tell whether the worst was already over.

According to the Financial Times, Mr Greenspan estimated that house prices in the United States would drop by a further 10 per cent from their levels in February, which comes to a 25 per cent drop from their peak.

'Such house price declines imply a major contraction in the level of equity in owner-occupied homes, the ultimate collateral for mortgage-backed securities,' he said.

United States economic growth has slowed dramatically in recent months and a growing number of economists believe the world's largest economy will experience a recession during 2008 amid a housing slump and related credit crunch. -- AFP

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