One of the three Americans who won this year's Nobel prize for economics said bloated public deficits on both sides of the Atlantic meant that recession remained a real risk for 2014.
Eugene Fama, who shares this year's 8 million crown ($1.2 million) prize with Robert Shiller and Lars Peter Hansen, said on Saturday that highly indebted governments in the United States and Europe posed a constant threat to the global economy.
"There may come a point where the financial markets say none of their debt is credible anymore and they can't finance themselves," he told Reuters in the snow-covered Swedish capital, where he will receive his prize on Tuesday.
"If there is another recession, it is going to be worldwide."
Fama, who has been called the father of modern finance and shared the economics prize for research into market prices and asset bubbles, played down this week's strong U.S. labor market data.
"I am not reassured at all," he said.
The U.S. jobless rate fell to a five-year low of 7.0 percent in November, and employers hired more workers than expected.
"The jobs recovery has been awful. The only reason the unemployment rate is 7 percent, which is high by historical standards in the U.S., is that people gave up looking for jobs," he said.
"I just don't think we have come out of (recession) very well," he said.
Fama, who argued in 1970 that markets are efficient and that prices reflect all publicly available information, said he will give his prize money to the University of Chicago, where he is a professor.
Asked what he thought of current high prices in the stock market, Fama said he believed companies had become much more efficient after the 2008-2009 financial crisis.
"The response of companies after the recession was to slim down, get much more effective and they got very profitable, so their prices continue to appreciate," he said.
Fama's theory implied that one cannot systematically outperform the market. He said he keeps his personal investments entirely in index funds, a type of mutual fund that tracks the performance of a market index such as the S&P 500 .SPX.