| If anyone thought that the present sluggishness in | | | | of it. |
| many housing markets in North America was | | | | Now, however, the tide is changing and the |
| going to hurt Realtors the most is better off to | | | | American economic powerhouse is slowing down. |
| think again. It seems that the slowdown in both | | | | This fact alone is causing a series of short-term |
| the new construction and the resale markets and | | | | changes that will make life harder for the Euro |
| the consequential drop in pricing levels is having | | | | economies. North-American consumers seem to |
| reverberations none other than in ... Europe. This is | | | | be more and more reluctant to snap up German |
| so because we have reached such a high level of | | | | cars, French perfumes and Italian vino. The United |
| economic integration, that it can be safely stated | | | | States, with an annualized GDP growth of 2.5 |
| that when we screw up in North America our | | | | percent as at June 30 lead the way, and there is |
| European friends end up footing the bill. | | | | a high degree of scepticism among analysts that |
| Globalization is the term commonly used to refer | | | | European consumers alone will be able to fill the |
| to the growing economic interdependence of | | | | 1.2 percent GDP gap so as to keep the Euro GDP |
| countries worldwide through increasing volume and | | | | high and steady. |
| variety of cross-border transactions in goods and | | | | Furthermore all this comes at a time when some |
| services, free international capital flows, and more | | | | Euro area countries, most notably Germany and |
| rapid and widespread diffusion of technology. | | | | Italy, are due to tighten their budgets. Their public |
| Clearly the economic interdependence between | | | | finances need repairing, and they need to act fast. |
| the United States and Canada on one side, and | | | | In Germany, the government wants to raise the |
| many members of the Eurozone - especially | | | | value-added tax by three percentage points next |
| those belonging originally to the former Western | | | | January. Italy's newly elected government, based |
| Europe - on the other side has never been more | | | | on a very frail one percent majority of a coalition |
| remarked than now. Not only there is a vigorous | | | | of center and leftist parties, is not openly talking |
| flow of capitals going both ways, but also the | | | | about any such drastic moves but, nonetheless, |
| trade of goods is at its apex. And this appears to | | | | has initiated already a series of public spending |
| be the problem. | | | | cuts which are sure to make the Fall labour |
| The European Union has released economic data | | | | market exceeding Italy's sweltering mid-August |
| as to the end of the second quarter, showing a | | | | heat by a few degrees. It would appear that the |
| GDP growth of 3.7 percent annualized, its fastest | | | | new economic theory of former Prime Minister |
| in six years. So fast, in fact, that for the first | | | | Silvio Berlusconi of "lowering taxes and raising |
| time ever the Zone has outrun America, Britain | | | | pensions" was more palatable to Italians than |
| and Japan. The engine that has spurred such | | | | Romano Prodi's neoclassical approach of |
| record-breaking growth, however, was the | | | | "everybody out". Some unions are calling already |
| ever-increasing consumerism mostly on the part | | | | for a psychiatric evaluation of the new Prime |
| of Americans. In essence, Europe has cashed in | | | | Minister. |
| on the spending power of Americans, which has | | | | Finally, the European Central Bank (ECB) has |
| increased hand-in-hand with the credit that lenders | | | | begun raising interest rates last December and is |
| in North America have extended to consumers, | | | | expected to keep doing so at least until the end |
| secured by their over-valued and | | | | of this year. One may wonder why is the ECB |
| over-appreciated real estate equity. | | | | poised to increase interest rates at a time when |
| Consumers in North America have had more | | | | exports are slowing down. The reason lies not |
| financial flexibility these past few years than ever | | | | with demand but with supply, as unsold |
| before, and for good or bad they have taken full | | | | inventories are beginning to accumulate, mostly |
| advantage of it. This flexibility has allowed them to | | | | for political reasons. In fact no one dares to lay |
| choose to carry debt when in the past they may | | | | off workers now, after the civic commotion |
| not have had this option. Additionally, it is certainly | | | | caused by the recent French rioting. |
| true that low interest rates have encouraged | | | | It turns out, therefore, that real estate agents in |
| more borrowing, which in turn has spurred more | | | | North America are not the casualties of the |
| spending. All the Porsches, BMWs, Volvos and | | | | markets taking a breather, at least not the only |
| Mercedes that we see on the streets are proof | | | | ones - Europeans stand to lose a lot more. |