Gross: Austerity Won't Work

PIMCO’s Bill Gross says that what is needed to fix the European debt crisis is growth and budget discipline — not mere austerity.

“No, that doesn’t work,” Gross says of the austerity approach in an interview with the Associated Press. “Eliminating a budget deficit won’t produce growth. It really requires a delicate combination of growth and budget discipline over the longer term. Policymakers have it tough.”

Gross says that bond investors do look at debt levels, but they also look at growth. And right now, that’s what’s lacking in Europe. “If a country can’t grow its way out of its predicament, we won’t go there. That’s why we’ve stayed out of Europe for the most part,” he says.

For Europe to heal, it needs to lure private investors, and to do that, balance is needed, not a policy of “cut everything”, Gross says. “If the private markets can’t be convinced, this crisis is going to be with us for a very long time,” he adds.

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