Pimco Says Europe Crisis Shows World Won’t Skirt ‘New Normal’By Sree Vidya Bhaktavatsalam
May 13 (
Bloomberg) -- Pacific Investment Management Co. said the debt crisis in Europe shows its outlook for an extended period of below-average economic growth remains valid, even after global markets rebounded from the financial crisis.
“What is happening in Europe is a vivid illustration of an underlying theme of the new normal,” Mohamed El-Erian, the chief executive officer of Pimco, said in an interview. There are “structural forces overwhelming traditional cyclical ones.”
European policy makers this week unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in financial markets and the euro. El-Erian has said Europe’s problems may spread across the globe because of investor concern that governments have borrowed too much to revive their economies.
Pimco, which coined the phrase “new normal” a year ago to describe a world characterized by high unemployment rates, more regulation, and a shrinking importance of the U.S. in the global economy, reiterated the view at its annual investment meeting last week in Newport Beach, California, the firm said today on its website.
“It is even clearer today than it was a year ago that the global economy has embarked upon a multiyear journey that is subject to many tensions,” El-Erian wrote in a commentary on the website. ...........(more)
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