Pimco Co-CEO Mohamed El-Erian says Europe has three choices: Fragment the Eurozone, create a "full fiscal union" in which member nations would go their own ways, or find a "middle ground" in which a "smaller but stronger euro zone" emerges where as many as three countries default on their debt and exit the European Union.

"They're making progress," El-Erian told CNBC, referring to the eurozone’s financial problems.

"The market is hoping they make even further progress. But the jury is still out as to whether that is going to materialize."
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"We are no longer looking at what we call a traditional bell curve where there is one dominant outcome," says El-Erian.

Mohamed El-Erian (Associated Press photo)

"We're looking at a curve that is much flatter and has much fatter tails. Investors have to test different exposures to that new distribution."

"That's what happens when you put sovereign risk at play."

A positive outcome, El-Erian noted, lies in successfully negotiating a majority agreement among EU nations and then getting the European Central Bank to go "all in" in terms of committing the requisite amount to backstop the bad sovereign debt.

"That will absolutely turn the market and that's the key issue right now," says El-Erian. "I will tell you (the chance of an agreement happening) is less than 50 percent.”

“A lot more has to happen in the next few days."

National Public Radio reports that the 17 finance ministers of the countries that use the euro converged on the European Union headquarters today in a desperate bid to save their currency — and to protect Europe, the United States, Asia and the rest of the global economy from a debt-induced financial tsunami.