MercoPress. South Atlantic News Agency

World’s largest bond fund predicts default for Greece “and other European economies”

Mohamed El-Erian, chief executive of PIMCO

The head of PIMCO, the world's biggest bond fund, predicted that Greece and other European economies would default on their debts to resolve their problems as the Euro area deals with its debt crisis.

Greece's government won a vote of confidence late Tuesday, a crucial step toward securing further short-term and longer-term financial aid from the European Union and the IMF as the country tries to avoid the Euro zone's first sovereign debt default.

“For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default,” Mohamed El-Erian, chief executive of PIMCO, told reporters in Taipei today via a video conference.

He didn't identify which economies other than Greece he was referring to.

El-Erian has suggested in the past that Greece would default and that Europe risks wasting money for nothing by pumping billions of dollars into the ailing economy.

“Nothing has been done to enhance growth,” he said. ”No single (Greek) indicator has shown strength. They are afraid a restructuring would hurt European banks.“

He doubted a Greek default could trigger another global financial crisis.

”Ireland, Portugal, Italy and Spain would have to be involved. But Greece is too small in terms of economic impact,” El-Erian said.

PIMCO, or the Pacific Investment Management Co, is based in California and is the world's biggest bond fund manager with nearly $1.3 trillion in assets under management.

Horacio Valeiras, chief investment officer of fund firm Allianz Global Investors Capital (AGIC), predicted that Ireland and Portugal, countries that also received financial bailouts in the wake of the global credit crisis, will have to restructure their debts.

PIMCO and AGIC are units of German insurer Allianz, which organized briefings for the media and investors.

“We are not investing in Greece, Ireland, Spain and Portugal,” said Valeiras, who appeared in person at the press briefing. He said default in Greece was “inevitable”.