Pimco's El-Erian: Greece Vulnerable for Euro Zone Sabbatical

Wall Street Journal
July 7, 2011

One of the world's biggest bond investors warned Thursday that the euro-zone debt troubles may spin out of control should policy makers continue to kick the can down the road.

In written comments for a live question-and-answer event at Reuters.com on Thursday, Mohamed El-Erian, chief executive and co-chief investment officer of Pacific Investment Management Co., or Pimco, said: "If it wishes to avoid a really disorderly outcome, Europe will be forced to opt for one of two corner solutions: fiscal union, or debt restructuring and, possibly, a euro-zone sabbatical for at least one (and possibly up to three) of the 17 members of the euro-zone."

"The more Europe delays this choice—and it is a difficult one—the greater the risk that policy makers may lose control of the situation," said Mr. el-Erian. He added that Greece is the most vulnerable country for both a debt restructuring and a euro-zone sabbatical.

Mr. el-Erian's comment on Greece came in response to a question as to which countries might leave the euro zone.

More