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 According to El-Erian's analysis, there are three potential scenarios:

1) "Fragmentation of the euro zone," in which the 17 member nations would go their own way, which he said would be "incredibly disruptive not just for Europe but also for the global economy."

2) "Full fiscal union," in which the nations adopt uniform financial reforms that would be more political in nature.

3) A "middle ground" in which a "smaller but stronger euro zone" emerges where as many as three countries default on their debt and exit the EU.

"We are no longer looking at what we call a traditional bell curve where there is one dominant outcome," he said. "We're looking at a curve that is much flatter and has much fatter tails. Investors have to test different exposures to that new distribution. That's what happens when you put sovereign risk at play."

The key to a positive outcome, he said, is negotiating a majority agreement among EU nations and then getting the European Central Bank to go "all in" in terms of committing the requisite amount to backstop the bad sovereign debt.

That all needs to happen in advance of the ECB's Dec. 9 summit to address the debt issue.

"That will absolutely turn the market and that's the key issue right now," El-Erian said. "I will tell you (the chance of an agreement happening) is less than 50 percent. A lot more has to happen in the next few days."