In a conference organized by the magazine Economist El-Erian, the CEO of PIMCO, talked about the choices of Greece and the likelihood of default. The Bloomberg article can be found here. In El-Erian’s own words:
“It’s in Greece’s interest to default as long as you can contain the contagion to other countries and it is done through orderly restructuring and repricing to retain competitiveness. Like Latin America’s “lost decade” in the 1980s, the alternative doesn’t promise growth and employment generation,” he said.
“I have never seen an 11 percent adjustment on the fiscal side being delivered” under the current program’s assumptions, said El-Erian, who worked at the IMF for 15 years. “Eleven percent is heroic.”
“The fiscal adjustment that Greece needs to do is unprecedented,” Giada Giani, senior European economist at Citigroup Inc., said at a conference in Brussels today. “There is a limit to the amount of fiscal tightening a country can bear and support without the tightening becoming self-defeating, so detrimental for economic growth that it doesn’t really deliver an improvement.”
