Pimco chief executive officer Mohamed El-Erian believes the UK has more tools at its disposal to tackle its economic problems than countries like Greece.
El-Erian, who is also Pimco's co-chief investment officer, says although the UK is under pressure, markets are now realising it is in a stronger position than EU nations like Greece where high deficits have worried investors.
"The UK has a high deficit and seen a rapid change in its GDP, but it has a certain ability to adjust. The UK has fiscal, monetary and political instruments it can adjust while Greece only has fiscal ones," he says.
"The question is: 'Will the UK be able to combine fiscal adjustment with economic growth?' "
El-Erian also outlined the three key considerations he believes should dominate investors' decisions this year.
"Firstly, labels matter a great deal as they tend to drive behaviour. The most common label this year is post-crisis, but this year is really about the multi-year resetting of markets and policy. The system will revert, but to a new normal."
"Secondly, balance sheets really matter. The crisis has been about the sequential contagion of balance sheets and when these exploded the public sector had to step in. 2010 is the year of sovereign balance sheet risk."
El-Erian points out prior to 2008, there were no advanced economies running a high deficit of 10% or greater of GDP, yet now 45% of advanced economies are running at this level.
"Finally, all this has accelerated something which was taking place before the crisis - the migration of wealth and growth dynamics from advanced economies to systematically important growth economies," he says.
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