Mohamed El-Erian of PIMCO blasted a warning in this morning’s Financial Times on the continuing European sovereign debt crisis.
Greece is still a shambles because no one is willing to lead on the EU-IMF plan, according to El-Erian.
And he says game theory explains it all.
- No one wants to act first on Greece
- Acting first would make that leader and state lose more
- But if all actors abide by the same logic, no one will act
- Greece will remain mired in its crisis and the crisis will spread to banks as individuals pull out money and choose not to invest in the country
- If the euro zone continues this inaction, it will have an even harder time dealing with potential future crises, like Spain and Italy
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