Mohamed El-Erian, chief economic advisor at Allianz, talks with Larry McDonald, author of “The Bear Traps Report,” about the political problems that face Europe and how the corresponding risks might affect global markets. This video is excerpted from a piece published on Real Vision on April 19, 2019 entitled “The Big Regime Shift.”

#Europe #GlobalMarkets #Risks

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Political Risks in Europe (w/ Mohamed El-Erian)
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Transcript:
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MOHAMED EL-ERIAN: If you look at the challenges facing the ECB, they're times 10 what the Fed
faces. Europe, for me, is the most vulnerable segment of the global economy, this year and next.
They are approaching what I call stall speed.
LARRY MCDONALD: OK, so look at Europe. Mr. Draghi is leaving in October. This is Mario
Draghi, Mr. Everything-it-takes Draghi. And we have, Ms. Merkel's potentially on the way out. So
the glue of Europe, that Angela Merkel, that foundation that's held everything together, is
potentially leaving, whereas the Salvinis of the world in Italy are strengthening.
We have political forces in Europe that are much more evenly distributed than centralized strength
of political force. If you think about the next head of the ECB, might we have a ECB head that
maybe is more supportive of populism in the south and supportive of deficits. Or might we have a
more Austrian-looking Schauble type. Schauble would never be in that role, but he's the former
Finance Minister.
But that thinking of austerity, that's isn't that the key to this? Where, if you look at the next head of
the ECB, and that ECB balance sheet. What are your thoughts on which way it might go?
MOHAMED EL-ERIAN: We don't know which way it's going to go. Because this is a political
process. Ultimately, it's going to be a political decision. We don't know.
But think. Think. Go back to the Patriots.
LARRY MCDONALD: OK. What makes the Patriots such a powerful team? And then compare it to
Europe. They have a number of very strong players that you can rely on. Their teamwork is great.
And they're very well-coached.
Let's look at Europe. The five major players in Europe are all having problems. UK, with Brexit.
France, with the yellow vest protest against Macron. Germany, going through a major-- as you
mentioned-- leadership transition. Spain, going to an election where it's not clear where they're
going to have clarity. And Italy, a new government that's trying to find its way around.
So the first thing we say about this Patriots in Europe team is that the major players are
problematic. But you say, don't worry, I have teamwork. What teamwork? Europe is not
functioning.

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