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By Jason Stipp | 05-07-2010 12:07 PM

El-Erian: Greek Woes Will Keep Spilling Over

The PIMCO CEO and co-CIO says the Greek crisis is going global, and may lead to tighter credit in Europe and stronger headwinds around the world.

Jason Stipp: I'm Jason Stipp for Morningstar. With Europe experiencing one of its worst weeks in the last 18 or 20 or so, it seems the sovereign debt crisis is spilling over and having more of a contagious effect than maybe was first anticipated.

We have the pleasure today of speaking with Mohamed El-Erian. He is PIMCO's CEO and co-CIO, and he's going to tell us a little bit about his take on what's going on in that region. Thanks for joining me, Mohamed.

Mohamed El-Erian: Thank you, Jason.

Stipp: First question for you, it seemed at first that a lot of people out there in the market thought that this situation was going to be contained. It obviously wasn't a great situation for Greece, but they thought it was going to be contained and handled there. It seems like that's not the case anymore. How much has this situation spilled over to really have an effect on a global level?

El-Erian: It is spilling over, and we should expect it to continue to spill over. One of the parallels is with subprime. At the beginning of '07 the general view was subprime is containable, it's isolated. We heard those same words being applied to Greece on the basis that Greece was just 3% of the GDP of Europe.

However, what we're learning is that we live in a very connected world and that a major disruption somewhere in the world has to be taken seriously because of this connectivity. And what we've seen happen is what started out as a Greek crisis has become a European crisis, and is now morphing into a global crisis. And the question is, what circuit breakers can be applied to contain what is now a spreading contamination of lots of markets.

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