Eurozone contagion fears broke new ground in recent weeks with news of Portugal’s downgrade and rising Italian yields. In this interview, Lorenzo Pagani, portfolio manager and head of the European government bond and European rates desk at PIMCO, discusses the worsening eurozone sovereign debt crisis and how policymakers need to do more to stem the crisis.
Q: The eurozone debt crisis, which moved from Greece to Spain and now potentially Italy, has reached a critical juncture. Is the EU’s current approach working?Pagani: The approach taken so far by European Union (EU) policymakers has been reactive at best, characterized by single steps forced by certain events. We believe this approach has been driven by the need to buy time without the will to fully commit the necessary political and economic capital needed to solve the problem. As a consequence, we now find ourselves facing a much bigger problem. The crisis has moved from Greece to Spain and to Italy in recent weeks, but the tools set up to address the crisis appear limited in scope and size to deal with the problem at hand.
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