UPDATE 1-PIMCO's Gross says indebted U.S. to resemble Greece

(Adds quotes, context,) By Sam Forgione

NEW YORK, Oct 2 (Reuters) - Bill Gross, founder and co-chief investment officer of bond giant PIMCO, said he sees the U.S. going the way of Greece if it does not get its fiscal house in order.

Gross, writing in his most recent monthly investment outlook, said the U.S. must cut spending or raise taxes by 11 percent of gross domestic product over the next five to ten years in order to preserve its role as financial safe haven.

"If we continue to close our eyes to existing 8 percent of GDP deficits, which, when including Social Security, Medicaid and Medicare liabilities, compose an average estimated 11 percent annual 'fiscal gap,' then we will begin to resemble Greece before the turn of the next decade," Gross wrote.

Gross said that the current deficit of eight percent of GDP still makes the U.S. the most viable option for investment safety, or "the cleanest dirty shirt," but that annual data from the Congressional Budget Office, International Monetary Fund and Bank of International Settlements show that the U.S.' estimated future debts suggest a "budgetary crystal meth" habit.

Gross has used the "cleanest dirt shirt" metaphor in an earlier investment letter, but the "crystal meth" habit analogy is new for the founder of Pacific Investment Management Co., the manager of about $1.8 trillion in assets.

The proposed 11 percent deficit that the U.S. is running up will require spending cuts and taxes amounting to $1.6 trillion per year, Gross said.

Gross added that the debt and "fiscal gap" issues are characteristic of the U.S., Japan, Greece, the U.K., Spain and France while nations such as Canada, Italy, Brazil, Mexico and China and other developing countries are more in control of their budgets and have less debt.

Gross, who has referred in past outlooks to the unsustainable debt pile the United States continues to accumulate, added that rising debts will lead the the U.S. Federal Reserve to print more money, stoking inflation and debasing the dollar.

The resulting scenario would adversely affect stocks and bonds, while only gold and real asset investments would survive, Gross said.

If the U.S. does not handle its estimated 11 percent annual deficit, "bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive," Gross wrote.

(Reporting by Sam Forgione; Editing by Theodore d'Afflisio)