Economy

Mohamed El-Erian: US pro-growth agenda may save Europe from new recession

El-Erian: US pro-growth agenda may save Europe from new recession
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El-Erian: US pro-growth agenda may save Europe from new recession

U.S. spending policies under President-elect Donald Trump may help pull Europe from the brink of recession in 2017, Mohamed El-Erian told CNBC on Wednesday.

"In a perfect world, the rebalancing that we're seeing in policies here — less reliance on monetary, more reliance on deregulation — would also follow in Europe," Allianz's chief economic advisor told "Squawk Box."

Deregulation, organic growth and a lighter agenda for the central banks would help the faltering euro zone, El-Erian said, and if the United States jump-starts those initiatives, the rest of the world will also break out of its low-growth rut.

Mohamed El-Erian
David Orrell | CNBC

"The hope is that the U.S. continues based on policy announcement becoming design and implementation, and I think that will happen, but we also need the rest of the world to get its act together," he said.

El-Erian said the United States is starting to depart from the "new normal," which the economist described as a period of low growth, negative interest rates and low productivity. He said political systems in the United States and in Europe have begun to rebel against that status quo.

"The post new normal is that the political system rebels against the low growth," El-Erian said, citing anti-establishments movements as how that rebellion manifests.

In the U.S., he said, it "looks like the anti-establishment movement could break out into higher growth. In Europe, it could break out into recession."

And if the dollar remains too strong, anti-establishment and protectionist rhetoric could gather more and more power and make a threatening dollar rally 2017's top story, El-Erian said.