The European debt crisis will deliver a "meaningful hit" to global growth and the recent selloff in stocks indicates the global economy has major structural issues, Mohamed El-Erian, CEO and co-Chief Investment Officer of Pimco, told CNBC Friday.
"The selloff in equities and other risk assets is not a typical cyclical retracement. It's a recognition of challenging structural issues. Stabilization and gains require structural solutions," El-Erian wrote in a note to CNBC.
"The Greek problem has morphed from local to regional to global. In the process, it has developed debt, economic and financial dimensions," he said.
One of the key critical issues facing the economy is the Greek debt crisis and whether it transpires to be a full-blown solvency issue instead of just a liquidity problem, El-Erian said.
The near-$1 trillion bailout package from the European Union and International Monetary Fund neared approval Friday after Germany's lower house of parliament approved a law allowing the funds to be released. The package is designed to ease the region's debt worries and lend stability to the euro currency.
El-Erian said he thinks the problems with Greek debt have gone beyond simple cash-flow issues.
The debt has to be restructured or there should be a "complete change in Europe's approach to provide zero-interest rate financing," he said.
The problems surrounding European sovereign debt will impact the global economy and land a "meaningful hit" to growth, he added.
El-Erian also said there is further to go in the "technical risk unwind trade."
Richard Bernstein, CEO Bernstein Capital Management, told CNBC that he wasn't as negative on the outlook for stocks as El-Erian, but agreed with some of the underlying concerns.