Tags: Pimco | Greek | Debt | Crisis | Flight

Pimco: Greek Debt Crisis Will Spark Flight to Safety

By    |   Tuesday, 27 Apr 2010 01:22 PM

The Greek debt meltdown will lead investors to abandon risky investments in favor of safer ones, says Pimco CEO Mohamed El-Erian.

"How long will it take for the market to worry more about contagion risk?" he asked. “For Europe, Greece is proving to be what the subprime crisis was in the U.S.”

At the outset of the Greek drama, many analysts said not to worry because the country accounts for only 2 percent of Europe’s GDP, El-Erian told CNBC.

“'It’s contained, it’s isolated,' they said. Now people are worrying about the euro, they’re worry about Greek banks.”

The crisis will be supportive for the dollar and Treasury bonds, the ultimate havens, El-Erian says.

“To the extent that people exit not just the peripheral countries in terms of their government debt holdings, but exit the European zone as a whole, Treasuries will gain.”

Peripheral European countries will be the first area affected by Greece’s woes — negatively, El-Erian says.

“Safe havens, they get impacted positively. Banks get impacted negatively, and ultimately you have the European corporates.”

The crisis is more about sovereign debt than Greece, El-Erian says.

Hedge fund star Louis Bacon of Moore Capital says the implications of Greece’s crisis may be severe for Europe.

"Perhaps the most interesting area for the foreseeable future is in the potential breakdown of the European Monetary Union," he wrote in a letter to investors obtained by MarketWatch.


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The Greek debt meltdown will lead investors to abandon risky investments in favor of safer ones, says Pimco CEO Mohamed El-Erian. How long will it take for the market to worry more about contagion risk? he asked. For Europe, Greece is proving to be what the subprime...
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2010-22-27
Tuesday, 27 Apr 2010 01:22 PM
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