From the San Francisco Chronicle / Bloomberg – Greece, Ireland, Portugal Should Default on Debt, Pimco Says:
Aug. 17 (Bloomberg) — European politicians should let Greece, Ireland and Portugal default while taking steps to ensure Italy and Spain won’t, according to Pacific Investment Management Co.’s Neel Kashkari.
“They are delaying and denying as long as possible because the medicine to actually put out this crisis tastes so bad,” Kashkari, head of new investment initiatives at Pimco, said in an interview on “InBusiness With Margaret Brennan” on Bloomberg Television. “They are always behind, always trying to play catch-up, and the crisis is always getting worse.”
Germany, France, the International Monetary Fund and the ECB should unveil a “massive” bailout package and announce it’s available to the entire euro zone, except for Greece, Ireland and Portugal, effectively letting them default, according to Kashkari.
That would create a firewall protecting Italy and Spain, said Kashkari, who joined Pimco in December 2009 after serving as head of the U.S. Treasury Department’s bank-rescue program. Pimco, based in Newport Beach, California, operates the world’s biggest bond fund.
“One, two or three countries may have to take a sabbatical; this is where we are going,” Mohamed El-Erian, chief executive officer of Pimco, said in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “You cannot converge financial variables without converging economic variables. The most important compromise is to stabilize the core.”