Europe's banks brace for UK debt crisis
UniCredit has alerted investors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece.
By Ambrose Evans-Pritchard, International Business Editor
Published: 8:20PM GMT 11 Mar 2010
No turning back: Sterling is going to fall further over coming months, warns Unicredit
The Italian-German group, Europe's second largest bank, said Britain's tax structure will make it hard to raise fresh revenue quickly enough to restore confidence in UK public finances.
"I am becoming convinced that Great Britain is the next country that is going to be pummelled by investors," said Kornelius Purps, Unicredit 's fixed income director and a leading analyst in Germany.
"Britain's AAA-rating is highly at risk. The budget deficit is huge at 13pc of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that," he told The Daily Telegraph.
"Sterling is going to fall further over coming months. I am not expecting a crash of the gilts market but we may see a further rise in spreads of 30 to 50 basis points."
Europe's banks brace for UK debt crisis - Telegraph