Richard Blackden and Rachel Cooper
London Telegraph 
December 4, 2011
European governments must rapidly commit to fiscal union or a partial break-up of the euro to prevent a “fundamental erosion” in demand for the region’s debt, Pimco, the world’s biggest bond investor, has warned.
“They can’t continue to muddle through,” said Andrew Balls, who runs Pimco’s European investments. “They’ll either have to signal their position or you’ll get a continued disengagement by investors from the eurozone.”
The stark assessment comes ahead of a gathering of European leaders in Brussels that has been billed as a summit that cannot afford to fail. A crisis that began in Greece almost two years ago, has since ensnared Ireland, Portugal, Spain and Italy, and now threatens France and Germany.
Rising bond yields across the continent will only alarm, rather than tempt, investors until there’s agreement on the future structure of the euro. “Yes, yields are higher but you have existential problems and risk that’s hard to quantify,” said Mr Balls, brother of Shadow Chancellor Ed Balls MP. “We’re very cautious and we’re underweight versus our indices.”