PIMCO's El-Erian: 'Europe Facing Moment of Truth'
Tweet
Share
E-mail
PIMCO's CEO and co-CIO Mohamed El-Erian issued a note commenting on Greece Friday, and his outlook isn't great.
El-Erian believes Greece ended up in its current predicament due to two major factors: inability to grow and an enormous debt burden. He points out neither has "influenced sufficiently the approach that has been adopted by the crisis management coalition, consisting of the Greek government, its European creditors (namely other eurozone governments, the European Commission and the European Central Bank) and the International Monetary Fund."
Instead, he writes, the focus has been on massive loans from official creditors and austerity for Greece. Greece has deteriorated beyond even the grimmest outlook from the management crisis coalition.
A blame game is now happening.
Greeks are angry that Europe didn't do enough to help Greece in its downward spiral, and the same is said to Greeks by Europe. It's a vicious cycle.
Current efforts, El-Erian contends, aren't enough, and will only prolong the cycle. Two things are in play now: Greece needing to regain control of its people and Europe needing to come to a conclusion about how to support the country.
To respond to the effort, one or possibly two of the following principals the coalition used in its approach to Greece might have to be given up, according to El-Erian: avoiding a debt restructuring, a currency devaluation and a change in the fiscal set up of the eurozone.
The time for action is running out, El-Erian said. Europe is now facing a moment of truth. "The task must now be to limit fundamental contagion to countries that are yet to be bailed out (notably Spain), and to maintain the integrity of the Euro."
Click here to read the essay in full.
El-Erian believes Greece ended up in its current predicament due to two major factors: inability to grow and an enormous debt burden. He points out neither has "influenced sufficiently the approach that has been adopted by the crisis management coalition, consisting of the Greek government, its European creditors (namely other eurozone governments, the European Commission and the European Central Bank) and the International Monetary Fund."
Instead, he writes, the focus has been on massive loans from official creditors and austerity for Greece. Greece has deteriorated beyond even the grimmest outlook from the management crisis coalition.
A blame game is now happening.
Greeks are angry that Europe didn't do enough to help Greece in its downward spiral, and the same is said to Greeks by Europe. It's a vicious cycle.
Current efforts, El-Erian contends, aren't enough, and will only prolong the cycle. Two things are in play now: Greece needing to regain control of its people and Europe needing to come to a conclusion about how to support the country.
To respond to the effort, one or possibly two of the following principals the coalition used in its approach to Greece might have to be given up, according to El-Erian: avoiding a debt restructuring, a currency devaluation and a change in the fiscal set up of the eurozone.
The time for action is running out, El-Erian said. Europe is now facing a moment of truth. "The task must now be to limit fundamental contagion to countries that are yet to be bailed out (notably Spain), and to maintain the integrity of the Euro."
Click here to read the essay in full.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Reddit surges premarket on index inclusion; Applied Materials’ dips
- Fox upgraded to overweight as Roku deal, ad strength lift outlook
- Nyc Pied-a-terre Tax Can Proceed For Now, Appeals Court Says - Bloomberg
Create E-mail Alert Related Categories
General News, Insiders' BlogRelated Entities
Pacific Investment Management Company, LLC (PIMCO), European Central Bank, Mohamed El-ErianSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
