PIMCO Head Predicts Default for Greece
The head of PIMCO, the world’s biggest bond fund, predicted that Greece and other European economies would default on their debts to resolve their problems as the euro area faces a debt crisis.
Greece’s government won a vote of confidence late on Tuesday, a crucial step towards securing further financial aid from the European Union as the country tries to avoid the euro zone’s first sovereign debt default.
“For the next three years, we’re going to see different economies work out different problems. For European economies, especially Greece, it would be through default,” Mohamed El-Erian, chief executive of PIMCO, told reporters in Taipei on Wednesday via a video conference.
El-Erian has suggested in the past that Greece would default and that Europe risks wasting money for nothing by pumping billions of dollars into the ailing economy.
He added on Wednesday it was “unlikely, but not impossible” that a Greek default would trigger another global financial crisis.
The confidence vote in Athens came after a European ultimatum requiring the debt-choked state to implement a five-year austerity package of measures within the next two weeks or miss out on a 12-billion euro tranche of aid money.
European policymakers are also considering a second bailout package worth an estimated 120 billion euros that is meant to extend Greece’s year-old 110 billion euro deal and fund it into 2014.
Dr. Pinna says:
El-Erian didn’t get his job as CEO of PIMCO for nothing. When El-Erian speaks, the world listens.
Although the European and U.S. banks don’t want to hear the dreaded word “Default!” they may have to.
A dinner in Athens is expensive.
When you have 11, 354,612 people (population of Greece) sitting down for dinner every night and not being able to pay the bill (or tip the waiter), you’ve got a problem that other Europeans do not want to face. And…it’s a problem for the next twenty years!
Time for the Drachma to show its shiny face…