Mohamed El-Erian, chief economic adviser at Allianz, contends the eurozone is a bit wobbly right now.
The eurozone idea was sold on the basis of it having four legs, but the eurozone is sitting on a chair with one and a half legs, he said. For example, Europe has only half of a banking union, which is supposed to be a common set of regulations for banks in countries that use the euro as their currency, but the region needs all of them to be fully integrated fiscally, Mr. El-Erian said Monday at the Milken Institute Global Conference.
“If there is no eurozone, there will be problems that go beyond Greece,” Mr. El-Erian said.
When asked what issues keep him up at night, Mr. El-Erian mentioned the Ukraine crisis; the country's economy contracted by 15% in the first quarter, he said.
“It's hard to maintain an economic stability and a cease-fire” at the same time, especially with interested parties that don't trust each other, Mr. El-Erian said. The situation could deteriorate, leading to the U.S. increasing sanctions on Russia and Russia employing counter sanctions, which could threaten the region with a recession.
“I don't expect the markets to price it in until it happens,” Mr. El-Erian said.