June 17th, 2011
Econintersect: Mohamed El-Erian, the CEO of PIMCO (Pacific Investment Management Company LLC), says that Europe faces a dismal decade as bail-out countries (Greece, Ireland and Portugal and possibly Spain) might spread solvency issues throughout the Euro zone. He says that the problem is being brought to a head because liquidity is being used to try to address a solvency problem. Follow up:
Follow up:El-Erian says:
It is now commonly accepted that Greece’s predicament is due to two inter-related problems: the economy is unable to grow, and the debt burden is enormous. Yet 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, the focus has been on dramatic austerity for Greece and massive loans from the official creditors. Not surprisingly, every economic, financial and social indicator for the Greek economy has deteriorated. This has happened both in absolutes term and, more alarmingly, relative to the coalition’s already grim expectations. Such failure naturally encourages a blame game, and sadly that is exactly what is now happening.
When fixing blame becomes the focus, finding solutions becomes much harder.
Source: Financial Times The A-List Blog