One year ago, in the December 2010 issue of The Letter – Europe, we described the unravelling of the global financial bubble of 2001–2007 as follows: “2008 was the year of the Banking Collapse. 2009 was the year of the Great Recession. 2010 was the year of the Government-Sponsored Recovery. 2011 is likely to be the year of Facing Consequences.” And, boy, was that proved to be the case! We saw Greece declared effectively bankrupt in May; speculative attacks on euro zone banks in August; the fall of the Greek and Italian governments in November; a US-dollar liquidity squeeze throughout the second half of the year; and we still don’t have a credible plan to rescue the euro zone from its fiscal crisis.

Of course, as real estate investors, we look to local market fundamentals in assessing fair value and pricing of our investments. And in “peacetime” conditions, one would expect the macro-economic environment to be relevant only insofar as local market job cr