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Pimco warns of “second Greece” in Portugal

Investment manager Pimco has warned that Europe could face a “second Greece” in Portugal as it continues to struggle with the debt crisis.

Pimco chief executive Mohamed El-Erian believes Portugal may need a second rescue package if the original £56bn package fails.

Speaking to Der Spiegel, he said: “Unfortunately, that is how it will be. It will make the financial markets nervous because they are worried about the participation of the private sector.”

The International Monetary Fund has said in its latest report that Greece remains “accident prone” and may need further help and more debt haircuts if the economy “fails to respond rapidly enough to reforms”. It has also warned that a “disorderly exit from the euro would be unavoidable” if the EU cuts off its support.

El-Erian said that EU leaders were deluding themselves if they think they have solved the Greek crisis.

He said: “The Greek package is going to fall apart quickly. Bridges built to go nowhere can collapse at any time.”

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