Nov. 25 (Bloomberg) -- U.K. banks are vulnerable to Europe’s debt crisis, according to Pacific Investment Management Co., home to the world’s biggest bond fund.
“The U.K. economy has made great strides in stabilizing its banking system, but it is not yet in a position where it can withstand a systemic European crisis involving multiple defaults,” according to the report by Mike Amey, a Pimco portfolio manager in London.
There is a chance Europe will slide into recession, reducing demand for the U.K.’s goods, Amey wrote in the report, which Pimco distributed by e-mail yesterday. Half of U.K. exports go to countries within the euro area, Pimco said, citing the Office of National Statistics.
Governments in Greece, Italy and Spain have fallen as investors question whether the nations can pay their debts. German Chancellor Angela Merkel yesterday ruled out joint euro- area borrowing and an expanded role for the European Central bank in fighting the crisis. Germany failed to sell all the bonds it wanted to at an auction Nov. 23.
“Ultimately, we are all ‘Europeans’ and if things continue to deteriorate it will certainly become everyone’s problem,” according to Amey. Pimco, which is based in Newport Beach, California, manages the $244 billion Total Return Fund.
--Editors: Garfield Reynolds, Jonathan Annells
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