Jun 22, 2011 5:08 PM GMT
Bad news: Greece looks like it is about to sink into chaos. Good news: it may not trigger another global financial crisis. Given that the problems have been spending, it's little wonder that the tea party movement in the US has continued to grow.
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 deals with its debt crisis.
Greece's government won a vote of confidence late on Tuesday, a crucial step toward securing further short-term and longer-term financial aid from the European Union and the IMF 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.
He didn't identify which economies other than Greece he was referring to.
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.
"Nothing has been done to enhance growth," he said. "No single (Greek) indicator has shown strength. They are afraid a restructuring would hurt European banks."
He doubted a Greek default could trigger another global financial crisis.
"Ireland, Portugal, Italy and Spain would have to be involved. But Greece is too small in terms of economic impact," El-Erian said.