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August 01, 2011 at 09:27 AM
Before the announcement Sunday night of a deal to end the U.S. debt crisis, Mohammed El-Erian said “that a potential budget deal in Washington will only bring short-term relief, and it won’t remove the threat of a U.S. debt downgrade by credit rating agencies.”
The CEO of PIMCO made his comments on ABC’s “This Week With Christiane Amanpour” prior to the announcement of a tentative agreement to raise the debt ceiling by $2.4 trillion and to offset the increase with deficit reduction measures over the next 10 years. The framework of the agreement, though, had already been announced.
“I think this compromise will lead to an increase in the debt ceiling, and therefore avoid default,” El-Erian (left) told Amanpour.” “But this relief will be short.”
“We have one rating agency out there that said it would downgrade unless certain things happen, and these things are not happening fast enough,” El-Erian said of the framework being negotiated at the time. “If the U.S. loses that triple-A status, it will be much more difficult for the U.S. to restore growth, so it’s unambiguously bad.”
Any deal may still not be enough to calm investors worldwide, El-Erian added.
