This reflects a sharp drop in house prices and sales, cutting tax revenues and pushing the budget deficit close to the stability-pact ceiling this year, and probably over it in 2009.

ECONOMIST: The French president mollifies his tone towards Ireland

Both are attempting to implement structural reforms, while cutting taxes, and both are certain this year to breach the stability pact's 3% limit on budget deficits for countries within Europe's single-currency area.

ECONOMIST: Reviving the sick men of Europe | The

" Offit, with decades of experience in fixed-income markets, believes "the Fed cutting the Fed funds rate may have inconsequential value other than signaling investors that it is concerned about maintaining economic stability in the face of an eroding housing market.

FORBES: The Fed's Economy: Too Good To Be True?