Both Morgan Stanley (at least Eric Chaney) and JP Morgan (in their latest global outlook) now recognize that Europe has emerged as an important engine of global demand growth.    Indeed, the 2005 surge in European demand seems to be reasonably well correlated with the surge in US pessimism about Europe.  Europe, the story went, couldn’t generate the political consensus to make the necessary labor and product market reforms, so it wouldn’t be able to support global demand. 

What did that story leave out?  Low European interest rates and the housing market.  I have often argued that Europe (France included) looks a lot more like the US than most folks realize.   Job growth hasn’t been all that impressive on either side of the Atlantic.  Indeed, by some measures, it has been better in old Europe.  Real compensation growth hasn’t been all that impressive on either side of the Atlantic. 

And in both regions, frothy housing prices have supported consumption growth.

Today, I am turning the blog over to Charles Gottlieb of the European Capital Market Institute and the Center for European Policy Studies.    He is writing in his own personal capacity – the usual disclaimers apply with force. 

His topic: the European housing boom (or bubble) – a topic he also wrote about in the Spring for the ECMI.   There is a lot of interesting material -- and a few nice graphs -- below the fold.  Enjoy.