Mohamed El-Erian has warned that, “European governments will soon face cascading challenges,” and that the European crisis may start to look like one most associated with developing markets.
Writing in the Financial Times, El-Erian suggests that it is not likely a bad result will be followed by a good turn for the crisis. Rather, we’re likely to see one thing go wrong after another.
He suggests that as the IMF, EU, and ECB have more of a role to play in this crisis, by doling out cash to countries like Greece and Ireland, they are endangering their own strengths.
And most worrying for investors: El-Erian sees the problems in the eurozone’s sovereign bond market spilling over to banks that hold them, endangering their balance sheets and credit ratings.