Pimco CEO expains the bailout mentality of Germany and why it won't work

Mohamed El-Erian, CEO of Pimco, in an economic address discusses the obvious problem with Germany's bailout.  This will come back to haunt Germany.  Germany, in bailing out every country that needs help is not contributing to the success of Europe, nor the Eurozone. 

Everyone knows that the Euro-Insurance covering fraud and overspending, otherwise known as European Financial Stabilty Fund (EFSF) is underwriting bad loans to Greece and Ireland.  Greece, of course, will never make the structural changes required to ever pay its debt.  Since it can't deflate its currency, that leaves Germany holding the bag.  Via Pimco:
The problem is that the current approach – centred on dealing with liquidity problems now and solvency issues later – is not working.

A liquidity approach that delays the day of reckoning may be good regional politics, but it's bad economics. It does not restore sustainable growth to the periphery, and it exposes the core to contamination.

Rather than simply doubling up on a faltering liquidity approach, the time has come for Germany to lead a more holistic solution focused on addressing the periphery’s debt overhang and competitiveness problems.


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