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Opinion
Marcus Ashworth

Pimco Extracts Its Pound of Flesh From Italy

It’s hard not to have sympathy for UniCredit as it tries to satisfy EU capital demands just as its funding costs soar because of Italy's budget battle.

Think Pimco's $3 billion investment was a vote of confidence in Italy? Think again.

Think Pimco's $3 billion investment was a vote of confidence in Italy? Think again.

Photographer: Stefan Wermuth/Bloomberg

It looks at first glance like a big vote of confidence that Pacific Investment Management Co is committing to a $3 billion five-year, fixed-rate investment in one of Italy’s largest banks, UniCredit SpA. But it comes at a high cost, as my Bloomberg News colleagues point out

The budget battle between Rome’s populist government and the European Union is taking a heavy toll, not just on sovereign debt but also the biggest of Italian institutions. Investor sentiment has improved this week on hopes that the Five Star and League parties are preparing to compromise marginally on their spending plans. But Pimco is being amply rewarded for its faith.