Economists at Pacific Investment Management Co., the world’s largest bond fund manager, believe that the European policymakers should allow Greece, Ireland and Portugal default making sure that Italy and Spain will be able to avoid this fate.
The specialists note that while the region’s authorities are reluctant to admit the necessity of such desperate step, the situation keeps deteriorating.
According to Pimco, Germany, France, the International Monetary Fund and the European Central Bank have to come up with a huge bailout package available to the entire euro zone, except for Greece, Ireland and Portugal, thus letting these indebted peripheral nations default and making Italy and Spain safe.
As French President Nicolas Sarkozy and German Chancellor Angela Merkel rejected at their summit on Tuesday, August 16, the idea of creating the common euro zone bonds and the expansion of the 440 billion-euro ($633 billion) rescue fund, Pimco thinks that the most likely scenario will be that the ECB will keep supporting the problem nations, while it itself will be bailed out by Germany.
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