As the eurozone troubles continue to mount, there is a growing consensus that “muddling” through won’t be enough. Critics say that more immediate and drastic action must be taken, namely by Germany and France, before the negative watch warning for the ratings of France and the regional bailout fund, the European Financial Stability Fund, potentially becomes something that matters.

One man, however, doesn’t think the disparate governments that can make a difference will.

And it’s a guy who knows a little about forecasted meltdowns.

According to the New York Times, in 2006, Nouriel Roubini, an NYU economist who has been nicknamed Dr. Doom, “laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.”

As the tale goes, the IMF audience he spoke to were skeptical to say the least. Some likely thought he was a funny little man. Others thought he was nuts.

Unfortunately, he was correct.

Now, he is predicting a major European recession, one large enough to spread worldwide.

Roubini predicts Europe’s leaders “will reach something of a compromise, but it won’t be sufficient” to solve the problem of too much government debt.

They will agree that “fiscal austerity and reforms will be necessary,” but those changes will only depress growth, leading to lower tax revenues and a deepening debt crisis. Eventually, investors in European bonds “will see they are insolvent,” he said.

“With Italy too big to fail, too big to save, and now at the point of no return, the endgame for the eurozone has begun,” Roubini said in a recent written assessment.

Hopefully, Doom won’t strike twice.

This year, however, only one rogue nation cracks the top five (North Korea). Instead, global macro-shifts and emerging, nontraditional global conflicts are viewed as the largest threats.

Below is a rundown of their top five.

Head over to their website for a more detailed description of their top ten global political risks.

1. The G-Zero

The concept of the “G-Zero” presents a world devoid of global leadership. Ever since American primacy has dwindled on the international scale, most thinkers have looked at a few likely realities for the coming decades: (1) the United States re-establishing itself as the dominating global power, (2) the start of a “Chinese Century,” (3) the “Rise of the Rest” in which multiple emerging economies (China, India, Russia, Brazil, etc.) become the most important political force or (4) the coordinated rise of international cooperation via bodies like the G-20.

Another scenario, the G-Zero, seems increasingly likely to the Eurasia Group and its head Ian Bremmer. And with no apparent global leadership, conflict rooted in nations increasingly operating for their own self interest will emerge.

the default policy response to a breakdown in global economic governance is every man/nation for himself. As demonstrated even in a politically integrated Europe, without common rules, there’s no such thing as collective economic security. In the G-Zero, domestic constituencies will become increasingly effective in pushing populist agendas on trade, currency, and fiscal policy. However much economic dispositions become ideologically statist, in the absence of agreed global norms, economic agendas are overwhelmingly resolved at the national level

On a conference call about this list today, Bremmer mentioned that this new reality was probably coming anyway due to various factors but has been delayed by the cooperative sentiments and two years of panic following the meltdown of the global financial system. Obviously, the fallout of that is far from over, but the panic has at least subsided.

Thus, enter the G-Zero — probably this year, they say.

2. Eurozone Economics

With the debt and fiscal concerns still mounting throughout the Eurozone, the next year may see increasing tension between the struggling economies (specifically, Ireland, Greece, Portugal and Spain) and those tasked with bailing them out (namely, Germany and France). Obviously, populist sentiments in Germany and France are making it harder and harder for Berlin and Paris to continue helping out other countries. Given this, the Eurasia Group sees a future of “bailouts with conditionality” that aren’t altogether appealing for either party, much like those adopted by the IMF and World Bank while loaning “strings attached” money to South American and African nations throughout the 1980s and 1990s.

In the meantime, real Eurozone reform remains difficult and far away. And the resulting uncertainty will make the market and investors increasingly leery of the region in the coming year.

3. Cybersecurity and Geopolitics

Despite Time magazine’s assertion that Facebook’s Mark Zuckerberg was the man of the year, WikiLeaks founder Julian Assange kicked a much bigger hornet’s nest last year. Now, information anarchists of his ilk will make more disruptions for nations that have their secret information exposed. (Companies, too … tread lightly.)

More importantly, cyberwarfare in which states attack states has become a reality. We have seen it in Iran, from China and (probably) from Russia. We will likely see it more in 2011.

4. An Unresponsive China

With China’s economy and exports still booming even amid sluggish global consumption, Eurasia Group believes that Western nations will implore Beijing to adjust its growth model to one that better dovetails with the policies of the world’s other leading economies. This is what is referred to as “global rebalancing.” China, in theory, agrees with the need to do this — not just to integrate with the rest of the G-20, but for its own self-interest. Long-term, its export-driven economy just isn’t sustainable, and it knows this.

But it is very unlikely that Beijing’s rebalancing schedule will come as quickly as other nations want it to. And this may cause great contention.

China will talk of participating in global coordination, but they will not follow through.

China’s pattern of export growth that is twice the rate of economic growth, with resulting large current account surpluses, will be the object of intensified international outcry as the world’s second largest exporter in a demand-constrained world economy. In 2010, the gloves started to come off between the United States and China. The trend broadens this year with Europe, japan, and much of the emerging markets and the developing economies also looking to China to adjust its growth model …

frustration with and pressure on China will build. So too will the risks of market-moving international reactions to China’s incremental, deliberate, consensus-driven approach.

Much has been made about how China will disrupt the “old world order” in the next few decades. For the next 12 months, however, Bremmer and company see this as the largest factor that may cause market disruption.

5. North Korea

Kim Jong Il was — and is — utterly nuts. So him beginning to transfer power to his son is, in a way, a good thing. How can anyone possibly be as certifiably insane as that guy?

But the transition also might prove to be a major destabilizing force on the Korean peninsula. And that could be disastrous for South Korea, the region and the international community.

North Korea’s decision to keep pushing the South Koreans’ buttons is almost certainly the result of a faster-than-expected leadership transition in Pyongyang. That’s the only variable that could explain the sudden dramatic change in behavior. The belligerence could be coming from external concerns—that Kim Jong Un will be vulnerable to international “testing” if Pyongyang doesn’t first prove his mettle. Or it could be internal if Kim Jong Il doesn’t believe he can win agreement within the North Korean leadership for his son’s safe accession, especially in the event that the father dies suddenly. The latter scenario is much more troubling in terms of North Korea’s willingness to provoke military conflict on the peninsula. There’s no way of knowing which of the two is the more likely.

On today’s conference call, Bremmer added that war on the peninsula is indeed a possibility and that, in fact, it is “probably the only place in the world that large-scale conventional warfare is possible.”

Troubling indeed.

Larry King: “Now, let me get this straight. First, Iceland’s economy collapses, and you ruin all the banks in Europe. Now, your volcano erupts, and you ruin all the airports.”
Bjork: “That’s right. We’re a tiny rock that is destroying the world.”

Later…

Larry King: “Now, Bjork, has anything positive come out of this.”
Bjork: “Yes. Iceland is now the world’s number-one exporter of volcanic ash. Previously, our main exports were reindeer bones and giggles.”

We also get an appearance from Sir Richard Branson and lullaby to the volcano from Bjork. Well played, SNL. Almost as good as the time Bjork joined Charles Barkley on Iconoclasts.

Here is the Times‘ graphic showing just how widespread the airport closures have been.

Over on their The Lede blog they also have video of the ongoing Eyjafjallajökull eruption, showing exactly how all that ash got into the atmosphere. Truly amazing. But truly troubling as well — and with no timetable for when flights may be able to resume.

Volcanologists had no reliable prediction of how long the eruption would continue, as travelers scrambled for train reservations, rental cars and hotel rooms. Others simply searched for comfortable benches in airports, which were considerably calmer and emptier than on Friday as passengers realized that no flights would be going in or out.

Europe’s three largest airports — London Heathrow, Frankfurt and Paris-Charles de Gaulle — were all shut on Saturday, with officials hoping that flights could resume sometime Sunday or, more likely, Monday.

Yikes.

The shutdown, among the most sweeping ever ordered in peacetime, forced the cancellation of thousands of flights and left airplanes stranded on the tarmac at some of the world’s busiest airports as the rolling cloud — made up of minute particles of silicate that can severely damage airplane engines — spread over Britain and toward continental Europe.

Obviously, this whole event is interrupting business throughout the EU and that is a big pain in the tuckus and people are upset and concerned and companies are losing money and yadda yadda yadda…

But much more importantly … LOOK, GUYS, IT’S LAVA … pretty much my favorite thing ever.

Below is a photo of an amazing eruption earlier this month by Eyjafjallajökull. I have no idea how to pronounce that. But it sure is gorgeous. Check out the Boston Globe‘s photo gallery for more awesome — both in the traditional sense and in cool-kid-vernacular — photos.

An eruption of the Eyjafjallajökull volcano earlier this year. (Photo: Ulrich Latzenhofer via the Boston Globe)

UPDATE: Even better, here’s video of an eruption in late March.

UPDATE II: And, OK, fine … here’s some actual info about the insurance and business implications of the Eyjafjallajokull disruption from our friends at National Underwriter. (h/t @travel_facts)

Gordon Woo, lead catastrophist for Risk Management Solutions, said insurance implications from the Eyjafjöll volcano eruptions could include payouts from Iceland’s national natural catastrophe insurance fund—which covers volcanic eruptions and glacial floods—if there is damage.

Additionally, he said business interruption for the aviation industry could be triggered due to the temporary closure of airspace in the United Kingdom and Scandinavia as a precaution over the airborne ash plume.

Aviation and travel insurers will be hit by the cost of several days of flight cancellations, Mr. Woo noted.

Floods from the melting glaciers will likely cause river levels to rise and potentially cause damage, RMS said, citing Iceland’s Department of Civil Protection and Emergency Management.

The ash cloud affect, said Bill McGuire from the Aon Benfield UCL Hazard Research Centre, can cause major damage to aircraft by clogging engines and causing them to flame out, and by scouring windscreens so as to make them opaque.

The article also mentions that the last eruption by this volcano last 12 months — so there could be ash problems again in the future. Stay tuned.

And head over to National Underwriter for even more insights from Woo and McGuire.

These were the topics of the discussion when us editors of Risk Managment got together to record this fourth installment of the RiskCast for your listening pleasure. Those of you who listen to the whole thing will get to hear a candid conversation about our biggest fears. Morgan’s are particularly scary.

Enjoy.

And remember, you can also subscribe to the RiskCast through iTunes by clicking here or searching for “RiskCast” within the iTunes store. Please let us know what you think by ranking us or giving us a review on iTunes.

RiskCast: Episode 4

Well, according to Eurasia Group, the number one risk for 2010 is U.S.-China relations.

In their annual “Top Risks” report, the firm’s president, Ian Bremmer, and head of research, David Gordon, announced their top risks today, which states that “2010 is likely to be much more turbulent geopolitically than 2009, when the world was preoccupied with coping with the global financial crisis, but saw no big geopolitical crisis.”

1. U.S.-China relations — The firm sees the relationship between these two powerhouses deteriorating significantly due to China’s reluctance to take more of a leadership role, as was seen during the Copenhagen climate conference. Other issues affecting the relationship include Beijing’s economic partnership with the U.S., the resulting higher tariffs on Chinese exports, differences in cap and trade beliefs and issues involving cyber-security, among others.
2. Iran — Eurasia Group points to Iran as the biggest “purely geopolitical risk in 2010.” The report focuses on the country’s struggling government, its nuclear program and its reaction to ensuing sanctions. “The Iranian regime looks increasingly like a cornered, wounded animal,” the report states. “In 2010, it’s likely to act like one.”
3. European fiscal divergence — It seems the fiscal challenges in Greece, Ireland, Spain, Portugal and Italy have created a massive area of financial risk in Europe. Eastern Europe faces escalating risks as well, especially if European Central Bank liquidity measures are curtailed.
4. U.S. financial regulation — Eurasia Group feels 2010 will prove to be a more difficult year for Obama than 2009. The firm points to unemployment remaining high, very challenging financial regulatory reform and mid-term elections affecting this reform. “Both the Americans and Europeans are aware of the risk of driving the financial industry into the ground with too much (or too drastic) regulation or taxation,” the report states. “But as reform becomes an election-year domestic battleground, the need to serve political interests will be increasingly at odds with the need to create an efficient framework for regulatory reform.”
5. Japan — Japan has had to endure sweeping political change and the new Democratic Party of Japan’s (DPJ) efforts to “limit the influence of bureaucrats and industrialists” has created an atmosphere of higher policy risk. Other concerns regard the uncertainty of the DPJ and the party’s less favorable disposition toward the business community, which is likely to harm financial confidence, further affecting economic woes.

The remainder of their top 10 list can be viewed here. It’s interesting to note the “red herrings” section listed at the bottom, which includes information on Iraq, the Persian Gulf, Russia, the dollar and New York and London.

Latvian Viktor Mirosiichenko has started his own loan company, asking that individuals sign an agreement stating that the company is obliged to the client’s “immortal soul” should they fail to pay back the money owed.

Mirosiichenko said his company would not employ debt collectors to get its money back if people refused to repay, and promised no physical violence. Signatories only have to give their first name and do not show any documents.

“If they don’t give it back, what can you do? They won’t have a soul, that’s all,” [Mirosiichenko] told Reuters in a basement office, with one desk, a computer and three chairs.

Will this type of loan agreement appeal to residents of the EU country hardest hit by the recession? Well, so far, the company has given out some 200 loans valued at up to 250 lats ($500) for between one and ninety days, complete with a substantial interest rate.

From his tiny office, Mirosiichenko is betting on the moral goodness of his fellow Latvians — a risky bet in an even riskier economic times.

In Riga, Latvia, one man is trying to use souls for collateral.

Mr. Schaeuble, are you serious?

True, a combination of mental health problems and societal influences, among others, play a part in reasons behind most school shootings, and all factors should be addressed. However, it is hard to control mental health and society at large. Tim Kretschmer, the 17 year-old shooter who killed 15 before taking his own life, had a history of depression and failed to continuously attend his outpatient therapy sessions. No one had control over helping him, just as no one has control over forcing an individual to continuously take medication for their mental illness. There is no total control over mental health.

Additionally, though attempts have been made, and some ground gained, in protecting influential children against violence and sex in television, films and video games, there will never be strong enough protection. If a 13 year-old wants to play Resident Evil 4 (ranked the #1 most violent video game), the age restriction on its purchase will not stop him. A friend, older brother or even his parents will purchase it for him and within the first minutes of play, that impressionable mind will see the corpse of a woman pinned up on a wall by a pitchfork through her face. There is no total control over societal influences.

There is control over guns. With tighter gun CONTROL laws, access to these killing machines can be greatly restricted. It is naïve to think that stricter gun control laws will put an end to school shootings, but with nothing else to control, we must turn to legislation in hopes of one day getting through a school year shooting-free.

Tighter gun control laws –- it’s a no-brainer, people.