Allianz Global – (UK Faces Tough Measures)

“Allianz Global”: Deep cuts in public spending and sharp tax hikes are on the way in Britain.

ROME, Italy – Allianz Global: While the eyes of the financial world are firmly trained on events in Greece and its potential knock-on effects on the Eurozone, analysts at Italy-based investment boutique, “Allianz Global” are paying more attention to the plight of the United Kingdom.

Britain’s consumers are the most indebted in the developed world and the country has spent more than any other on bailing out its banking sector. As a result of the billions being spent by the government, the country has been warned by both Moody’s and Standard & Poor’s that it must table credible plans to reduce its huge deficit or suffer the ignominy of losing its AAA sovereign credit rating.

Sources close to “Allianz Global” believes that the winner of the forthcoming general election will not be able to reduce public spending or hike taxes to the degree required to satisfy the financial markets.

Aside from the financial market aspects, “Allianz Global” have warned clients expecting a rebound in the property market to lower their expectations citing the very real possibility of interest rate hikes being forced on the country by bond market investors demanding higher yields in return for the additional risk of holding UK gilts.

The firm is also skeptical of the argument that a weaker pound helps the country’s exports citing the woeful 4^th quarter GDP number which showed the economy grew by only 0.1% despite a pound that has lost significant ground against both the dollar and the euro since the financial crisis began in 2007.