Pimco co-CEO Bill Gross warns investors to stay away from bond investments in a "dysfunctional" eurozone.
"At Pimco we're basically underweight the southern European countries," Gross told CNBC. Greece and Portugal are "increasingly on death rows…and (German Chancellor Angela) Merkel speaks about austerity."
The main problem is the difference in attitudes and handling of money between northern countries, which have low debt and export-oriented, and those in consumer-based southern Europe, where debt ratios are high.
"Their ability to get out from under that straightjacket I think is their biggest problem," he said, adding that a recent summit of European Union leaders had no significant contribution to solving the eurozone's problems.
"The last few weeks have been a reflection of the liquidity provided by the (emergency funding scheme) LTRO, says Gross. “We have the suspicion that Italian banks are buying Italian debt.”
"Ultimately it will take a lot of liquidity from the LTRO and future LTROs to stabilize Italy, to stabilize Spain going forward."
That’s not without risks, warns Gross, because while liquidity is a short-term fix, the only real solution is for European economies to grow.
Gross is no more enthusiastic about U.S. bonds. "We find yields very low and unattractive from a historical point of view … the best idea in the U.S. would be to buy mortgage debt," he says.
"We would be buying 2-3 percent yield in mortgage debt as a substitute for Treasury bonds and notes."
Meanwhile, an international banking survey shows that bankers see a high risk that the euro crisis will cause a banking crisis and global recession.
The annual "Banking Banana Skins" survey by the Center for the Study of Financial Innovation (CSFI) and PricewaterhouseCoopers reveals that bankers are more fearful than ever that the eurozone debt crisis will prompt countries to default and the euro to collapse.
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