Debt woes in countries such as Greece were never a problem for U.S. investors in the past but they are today, says Mohamed El-Erian, CEO of bond giant Pimco.
Many major economies are increasingly interconnected and subject to fallout that comes with rising debt burdens and bailouts. What ails Greece also ails the United States.
“The U.S. is not Greece. The U.S. has elements of Greece,” El-Erian tells CNBC.
“You recognize that the minute the sovereign is disrupted that has ripple effects through risk markets,” he says.
Greece is struggling to narrow its budget deficit to the European Union limit of 3 percent from the current 12 percent, and European officials are working on ways to help Athens out.
Debt issues in Greece and elsewhere will create a “new normal,” a scenario under which economies grow more slowly than they previously did in periods of recovery, says El-Erian.
El-Erian says there is a 60 percent chance of “muted growth and dead dynamics” ahead.
The International Monetary Fund (IMF) has said it will help Greece, but officials have not laid out concrete measures.
“We stand willing and able to support Greece in ways that the Greek authorities think is appropriate,” IMF First Deputy Managing Director John Lipsky told Reuters.
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