Feb. 25 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said a possible recession in the U.S. this year may be deeper than the last two contractions.

``The existing financial problems are deeper than we've had for a while, so I wouldn't be surprised if this recession is deeper than the last two shallow recessions,'' Greenspan said at a conference today in Abu Dhabi, United Arab Emirates.

Over the past year, Greenspan has gone from seeing a one-in- three chance of a recession to an estimate of ``50 percent or better.'' Wall Street firms including Merrill Lynch & Co. and Goldman Sachs Group Inc. are forecasting the first contraction since 2001. The last two downturns lasted about eight months.

``We're at stall speed,'' the 81-year-old former Fed chief said today. ``When you're at stall speed, anything that goes wrong takes you lower.''

The proportion of economists who forecast a U.S. recession this year more than doubled over the last three months, to 45 percent, according to a survey released today by the National Association for Business Economics.

The Fed will lower its benchmark interest rate between banks to 2.5 percent this year, from the current 3 percent, according to the NABE survey median.

Growth in emerging economies will continue to outstrip that of the U.S., while their currencies will also appreciate against the dollar, Greenspan said. He also urged nations in the Persian Gulf to move toward letting markets set exchange rates.

Dollar's Primacy

``We have enough liquidity in the world to support more than one major currency,'' he said. ``I doubt the dollar will fall from number one.''

At the same time, he said at a separate conference later in the day that private holdings of euros may exceed those of dollars in the next five to 10 years. ``I imagine that is what will happen,'' Greenspan said.

Referring to Persian Gulf countries, he said ``letting the currency float is probably the best way to stop the flow of foreign exchange into the economy and cause inflation.''

Globally, sovereign wealth funds ``on balance'' have done a ``good job,'' and any restrictions would be a ``very bad idea,'' the former Fed chief said. The funds have increasingly bought stakes in U.S. and European banks in the aftermath of the subprime crisis.

He said it was ``worrying'' that China and other nations are using price controls on food and energy products to limit inflation.

U.S. Home Prices

Greenspan also said home prices in the U.S. will ``continue to fall'' and the housing slump is having a ``broader effect'' on consumer spending. He added that oil prices, which surpassed a record $100 a barrel last week, will keep rising.

Fed Chairman Ben S. Bernanke, Greenspan's successor, earlier this month warned that policy will have to be ``calibrated'' over the next year to meet both inflation and growth objectives.

Bernanke is scheduled to before Congress Feb. 27-28 on the central bank's semiannual monetary policy report to Congress.

``I try to avoid commenting on my successor because he has enough problems,'' Greenspan said today.

Greenspan criticized Democratic presidential candidate Barack Obama for taking ``anti-competitive'' policy stances. ``It is conceivable that Barack Obama would forget many of the positions he has taken once he is in office, which are very troubling and anti-competitive,'' Greenspan said. He didn't specify any particular policies.

Greenspan left the Fed in January 2006 after almost two decades at the helm. He has returned to his role as a private economic forecaster, speaking at conferences and to groups of bankers and investors, while consulting for clients such as Deutsche Bank AG.

To contact the reporter on this story: Anthony Massucci in New York at amassucc@bloomberg.net To contact the reporter on this story: Matthew Brown in Abu Dhabi at mbrown42@bloomberg.net

Last Updated: February 25, 2008 12:33 EST