In an intensely personal article, PIMCO’s Mohamed El-Erian vividly recalls the political unrest and all-out war that marked his childhood in Egypt in order to make a larger point about anxiety in Europe.
Writing on the Project Syndicate website on Monday, El-Erian moves from the “war of attrition” with Israel following the June 1967 war, through the war in 1973 and up to the 1979 peace agreement.
“To this day, I remember vividly the sense of general anxiety that prevailed among citizens, accentuated by deep concern about what the future might hold,” he writes. “People were afraid to invest, and many wondered whether they should emigrate in search of a better future.”
He recounts this history, he explains, “not to draw a parallel with today’s Israeli-Palestinian conflict, which, just a couple of weeks ago, resulted in many civilian deaths, overwhelmingly in Gaza. Rather, it is because I see too many parallels with what is happening in the European debt crisis.”
European citizens – particularly in peripheral economies such as Greece, Portugal, and Spain – are anxious, El-Erian notes. Unemployment is “unacceptably” high and still rising. Their economies continue to implode, leading to cumulative contractions that are setting tragic new records. Poverty is on the rise. Not surprisingly, increased emigration to the stronger euro zone countries (such as Germany) has been accompanied by higher outflows of financial capital.
“Admittedly, and fortunately, the parallels are far from perfect,” he concedes. “Europe does not have armed conflicts. Feelings of intense insecurity are not related to bombs and sirens. The threat is economic rather than military. Yet there is a real sense of ‘no peace and no war.’”
The longer this prevails, “the more oxygen is sucked out of sectors that remain relatively healthy. This is for three distinct reasons.