Tags: Pimco | Crescenzi | Greece | Euro

Pimco Strategist Crescenzi: Greece Likely to Exit Euro

Wednesday, 16 May 2012 03:08 PM

 

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Greece is likely to leave the 17- nation European currency to boost economic growth and to be able to afford to pay its debts, according to Pacific Investment Management Co.’s Tony Crescenzi.

“To compete it probably needs a far weaker currency, and it can’t accomplish that in the euro -- and that’s one of the major reasons why it’s likely to pull out at some point,” Crescenzi, a strategist at Pimco, which oversees the world’s largest bond fund, said in an interview on Bloomberg Television’s “InBusiness” with Adam Johnson and Stephanie Ruhle. “It’s very difficult when you do the math to see how Greece stays in, given the level of the euro and what that means for Greece, and given the lack of competitiveness in Greece.”

Greece’s future in the euro has been thrown into doubt by the political standoff following inconclusive May 6 elections. President Karolos Papoulias called for new elections yesterday. German Finance Minister Wolfgang Schaeuble said the next vote will be a referendum on whether Greece exits the euro, a move that would leave lenders to its government, businesses and households unsure of recouping their money.

“For Greece to have debt sustainability, it must restore three things -- it must restore its growth, its competitiveness and its external balance,” Crescenzi said. “It can’t do that easily not controlling the currency. It needs a weaker currency to enable greater exports, and greater exports lead to more money coming in. More money coming in makes it easier for a country to pay its debts off.”

Gloom on Growth

The euro was little changed at $1.2732 at midday in New York Wednesday after touching $1.2681, the weakest level since Jan. 17. It advanced 0.2 percent to 102.27 yen.

Pimco is gloomier about the medium-term outlook for the world economy than it was a year ago, Chief Executive Officer Mohamed El-Erian wrote in a report published Tuesday on the Newport Beach, California-based company’s website. It sees advanced economies growing an average 1 percent per year over the next three to five years while emerging economies expand 5 percent annually. Last year, the money manager foresaw growth of 2 percent and 6 percent, respectively.

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