Pimco is the world's largest bondholder and when its CEO Mohamed El-Erian speaks people tend to listen. Today the Greek newspaper eKathimerini has an interview with El-Erian in which he says the famous 50 percent haircut for Greece's bond holders is not enough.
"According to our analysis, 50 percent is not enough for Greece to restore credibly the conditions for medium-term debt sustainability and economic growth. A 50 percent haircut would still leave open way too many questions about Greece’s economic and financial outlook," the CEO told the paper.
El Erian also lays out his analysis - without making a judgment - about whether Greece should stay in the euro zone.
"The decision of whether to remain in the euro zone is one that has to be made by the Greeks themselves. If Greece decides to remain within the euro zone, it would be signing up for many years of “internal devaluation,” namely, using wage and expenditure compression as the tools to regain competitiveness and jobs. Exiting the eurozone provides greater policy flexibility, but this comes at a cost of significant initial disruptions that, in the immediate instance, would undermine both economic activity and the financial system yet offer better prospects for subsequent and sustained recovery."
The interview was published on a day when Greek negotiators are in Washington talking to the IMF about further bailout funds and as representatives of the "Troika," the EU, IMF and ECB flew to Athens to discuss further reforms. Hopefully, the Troika has private limousines waiting for them at the airport because public transport workers are striking over austerity measures today.