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El-Erian: Greek Debt Resolution is not a Done Deal

Mohamed El-Erian, CEO of bond investment giant PIMCO, writes at that the Greek  debt crisis resolution is headed south.  He says:

Unfortunately, it is likely that things will get worse for Greece before they get better. In the short run, the persistence of alarming risk spreads will lead to even more cautious behaviour among depositors and investors. Late movers will sell Greek assets rather than buy, putting even greater pressure on the government’s ability to raise sustainable funding for its forthcoming debt maturities in May.

El-Erian writes that the Greek government is having difficulty in convincing its citizens of the severity of the situation and creditors are balking at further financing of a country that will not bite the austerity bullet.  He concludes with this:

Buoyed by a cyclical recovery, markets around the world have yet to recognise the complexity of this situation. When they do, it will also become apparent that Greece is part of a wider, and historically unfamiliar phenomenon – that of a simultaneous and large disruption to the balance sheet of many industrial countries. Tighten your seat belts.


Disclosure: No stocks mentioned.