For much of the past year, Bill Gross of bond giant PIMCO has advocated “shaking hands with the government” — that is, investing in areas that benefit from the government’s massive bailout and stimulus efforts. Now, Gross says 2010 will be a year in which investors should ask “which government” they should shake hands with — and his answer might surprise you.

In his latest Investment Outlook on PIMCO’s web site, Gross — in addition to lambasting the U.S. government on a number of fronts — predicts that the Federal Reserve will begin to end its “quantitative easing” around the end of March, and that other governments are likely to do the same during 2010. That will make it a year in which “investors should consider economic fundamentals and asset markets that will soon be priced in a world less dominated by the government sector”, given “that the days of carefree check writing leading to debt issuance without limit or interest rate consequences may be numbered for all countries.”

For the U.S., the problem is that the nation has run up huge deficits that Gross says private investors will be unlikely to absorb when the government wants to implement its exit strategy: “Various studies by the IMF, the Fed itself, and one in particular by Thomas Laubach, a former Fed economist, suggest that increases in budget deficits ultimately have interest rate consequences and that those countries with the highest current and projected deficits as a percentage of GDP will suffer the highest increases — perhaps as much as 25 basis points per 1% increase in projected deficits five years forward.”

That’s not good news for the U.S., U.K., Japan, France, and many other countries that will have structural deficit increases in their future budgets. But Gross says at least one country is in good position: Germany. “Using 2007 as a starting point and 2014 as a near-term destination, the IMF numbers show that the U.S., Japan, and U.K. will experience ‘structural’ deficit increases of 4-5% of GDP over that period of time, whereas Germany will move in the other direction,” Gross writes, adding that Germany has just passed a constitutional amendment mandating a balanced budget by 2016.

“If these trends persist, the simple conclusion is that interest rates will rise on a relative basis in the U.S., U.K., and Japan compared to Germany over the next several years and that the increase could approximate 100 basis points or more,” Gross says.

The bottom line, according to Gross, is that private investors may well start keying in on bond markets like Germany, which have their fiscal house more in order. And countries like the U.S. may find their asset markets suffering as their government stimulus is withdrawn, with “most ‘carry’ trades in credit, duration, and currency space … at risk in the first half of 2010 as the markets readjust to the absence of their ‘sugar daddy,'” Gross says.