Pimco sees eurozone?s present form not lasting

Pacific Investment Management Co (Pimco), which manages the world?s largest bond fund, does not see the European currency union surviving in its present form. ?The status quo is no longer an option for Europe over the three- to five-year horizon,? Pimco Chief Executive Officer Mohamed El-Erian (photo) wrote in a report outlining the Newport Beach, California-based company?s medium-term economic outlook.

The most probable outcome is that the 17-nation euro area will evolve into a smaller union centered on France, Germany, Italy and Spain, and underpinned by much stronger coordination and financing, he said. A ?big derailment? of the current pact is still a risk, according to El-Erian.

The euro fell to its lowest in almost four months against the dollar on Tuesday as a leadership vacuum in Greece prompted European officials to weigh prospects for the currency union?s first departure of a member state. [Bloomberg]