On the eve of Greece agreeing its first EU-IMF bailout in May 2010, the CEO of investment firm PIMCO, Mohamed El-Erian, expressed doubts about the package, what it demanded of Greece and whether the Europeans would be able to manage the process. “This is a daunting challenge,” he wrote in the Financial
Times. “The numbers involved are large and getting larger; the sociopolitical stakes are high and getting higher; and the official sector has yet to prove itself effective at crisis management.”
El-Erian raised the issue of private sector involvement, or PSI, almost two years before it happened and warned the eurozone that it was walking into a potential disaster. “What started out as a public finance issue is quickly turning into a banking problem too; and, what started out as a Greek issue has become a full-blown crisis for Europe,” he wrote.
This week, Bloomberg revealed that PIMCO has been selling the Dutch bonds it was holding. Until now a financial, AAA-rated safe-haven in the eurozone crisis, the Netherlands’ bond yields are edging upward, its coalition is under pressure and “austerity fatigue” is apparently setting in. El-Erian’s warning in May 2010 that the Greek debt crisis would “morph into something much broader” has been proved correct.