Individual European countries will "take actions to stabilize their own banking systems to make them resilient," Pimco’s Neel Kashkari told CNBC Tuesday.
“[This will] allow the Greeks to default, and maybe even exit the euro zone,” Pimco’s managing director said.
“You’re going to see the [European Central Bank] continue to put more sovereign debt on its own balance sheet to try to spread foam on the runway, so to speak, to allow Greece to default—maybe Portugal, maybe Ireland, I’m not sure exactly which ones,” Kashkari said.
This will “preserve the integrity” of the euro zone as a whole and prevent contagion, he added.
Although Kashkari acknowledged the politics are hard because the debt is not spread evenly among the euro zone countries.
"There's no question European policymakers are behind the crisis, just like we were behind the American crisis in '08," Kashkari noted. "And that's because the medicine to deal with it is so distasteful, you don't want to take the medicine until you absolutely need to."
But, Pimco isn’t staying away from Europe as whole.
"We are staying away from Greece, Ireland—the really sick countries, which just have way too much debt that their economies can not afford,” said Kashkari.
“The bottom-line is there are other attractive countries around the world that we can be investing in—whether it’s Mexico, whether it’s Canada, whether it’s Australia," he said.
"We don’t need to take the uncertainty of not knowing which countries survives."
- Slideshow: The World's Biggest Debtor Nations