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‘If you really want a fiscal problem, look at the UK’

uk crisisInvestors are asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.…

“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe, the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”

the government and its citizens have been able to continue to borrow at interest rates that do not reflect their true financial situation.

As for the British government, it has been able to finance a budget deficit of 12.5 percent of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.

David Rosenberg of Gluskin Sheff also referred to the piece in his morning missive, noting:

Britain is probably one of the few countries in the world where political uncertainty, a renewed round of house price deflation and a sinking currency can manage to elicit a bounce in consumer sentiment (the country has a Greek-like 12.5% deficit-to-GDP ratio, which is double the European average and a household debt-to-GDP ratio that, at 170%, makes the U.S. household sector downright frugal at 130%