Europe is likely already in a mild recession, and the United States could very well join it, but the global economic turmoil is unlikely to reach the depths of the 2008 downturn, Morgan Stanley's Stephen Roach said on Tuesday.

Unless Europe totally vaporizes before our very eyes, and that is not my view, I think the likelihood of a major global shock that would prove so disruptive to the entire world economy, is low, Roach, non-executive chairman of Morgan Stanley Asia told the Toronto CFA Society forecast dinner.

Roach -- one of three presenters, along with Goldman Sachs strategist Abby Joseph Cohen and interest rate prognosticator James Grant -- said the U.S. economy was barely growing, and said he expects major Euro economies France and Germany to soon begin to contract, joining other European nations that are already doing so.

To me, the major economies of the developed world are right on the brink of a recession and are likely to tumble into a recession over the course of the next 12 months, he said.

He said the path out of trouble for the troubled Euro region is straightforward, if not exactly easy to make happen.

Europe needs a fiscal union, he told the crowd of more than 1,000 packed into a subterranean room of a massive convention center in downtown Toronto.

That requires 17 countries to come together and give up some of their sovereignty and recognize that without a cohesive fiscal union this monetary union is doomed to failure and will break up. It's that simple.

He was more upbeat on China, which has been his home for the last several years.

He said concerns of a European-style crisis afflicting Chinese banks were overblown, but warned that commodity demand from the massive economy is set to drop as China shifts to a more consumer-focused economy.

Meanwhile, Fed Chairman Ben Bernanke told Congress on Tuesday that U.S. economy is close to faltering and that European financial strains posed ongoing risks to its economic growth.

COHEN SEES CLOUDS THEN GROWTH

Cohen, whose firm cut its outlook for 2012 global GDP growth to 3.5 percent from 4.3 percent on Tuesday, said Europe's woes will continue to cast a dark cloud over other economies.

However, she said the political will exists for Europe to solve its sovereign debt and bank capitalization problems.

The recession that we're forecasting, particularly in the periphery of Europe, is something that we think will not be particularly steep and something that at this time next year will give way to a period of economic growth, albeit not a particularly robust period of economic growth, she said.

(Reporting by Cameron French; Editing by Ramya Venugopal)

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