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El-Erian: Europe Finally ‘Gets’ Severity of Debt Crisis

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Policymakers in Europe “finally” understand the severity of the region’s sovereign-debt crisis and the actions that need to be taken, Pacific Investment Management Co.’s Mohamed El-Erian told Bloomberg Radio on Tuesday.

“What I learned in Washington is that Europeans finally get it,” El-Erian. “They recognize they have deep problems, and they recognize they need to do something about it. And now they are going back and will try to do something about it. This was a very important wake-up call for Europe.”

As the news service notes, finance chiefs from the Group of 20 agreed to increase the flexibility of their rescue fund and “maximize its impact.” European Central Bank policy makers have indicated they’ll consider expanding liquidity provisions when they meet on Oct. 6.

“But let’s not underestimate both the political challenges and the engineering challenges,” El-Erian continued. “There is a lot that has to happen just today.”

Speaking of the situation in Greece in a separate issue interview on Bloomberg Television on Tuesday, El-Erian said “Greece is like the toe that got infected. It was not dealt with, and it just spread throughout the entire body and is now threatening vital organs.”