WASHINGTON: The global economy may be in for a painful reality check this week, should a heavy slate of housing-related data indicate a growing mortgage malaise.

In the aftermath of the rescue of the investment bank Bear Stearns, orchestrated by the U.S. Federal Reserve Board, and deep interest rate cuts, some analysts have begun to speculate that the worst may soon be over for battered financial markets.

They point to encouraging signals in the form of stronger-than-expected earnings from Wall Street bellwethers like Goldman Sachs and Morgan Stanley, some easing of pressures in credit markets, and a well-received initial public offering by Visa.

Yet the sense of panic was still palpable last week as stocks tumbled on the faintest rumor that another bank could be poised to announce more write-downs of bad debt.

“Psychology has now overwhelmed economics,” Alan Blinder, economics professor at Princeton University and a former Fed vice chairman, wrote in an essay in The Washington Post.

Yet, U.S. economic data show a deterioration in the manufacturing sector, a sagging job market and a decline in consumer spending - three worrisome signs that a recession may have begun.

Not all the news has been gloomy, however, with solid U.S. exports in particular providing much-needed support. While the rest of the world economy has cooled somewhat, fears of a U.S.-led global recession have yet to materialize, and the Organization for Economic Cooperation and Development said Thursday that growth in the euro zone would continue.

“The skys not falling in,” Jorgen Elmeskov, the OECDs chief economist, said in an interview.

This week, a close inspection of the U.S. housing sector may reveal that deep cracks in the economic foundation have yet to be repaired. The financial market turmoil, now in its eighth month, has its roots in failing mortgages, so until the housing sector is stabilized, there is little hope for sustainable recovery.

Not only has the slumping housing market hurt the U.S. economy, but because American mortgages were repackaged into complex securities that were sold all over the world, it is also the primary cause of stress in global financial markets.

While no one expects the reports this week to show a U.S. recovery under way, economists will be looking for evidence that the pace of the decline is slowing.

First up is data on existing home sales in the United States, due Monday, followed by the SP/Case-Shiller report on home prices Tuesday and single-family home sales Wednesday.

Should the data confirm there is no end in sight to the housing woes, it could put more pressure on the U.S. government to bail out the mortgage market.

Barney Frank, the Massachusetts Democrat who is chairman of the Financial Services Committee of the House of Representatives, has proposed offering $300 billion of government insurance for troubled mortgages if lenders agree to erase some of the loan amount. But the response from the White House to the plan has been cool.

Housing problems are not confined to the United States. A report Thursday showed that Irish economic growth slowed in the final months of 2007, in part because of a construction sector slump as the countrys decade-long property boom ended. Layoffs in the sector helped to push Irish jobless claims to their highest level since 1999 in February.

House prices in Germany fell 0.7 percent in February, the first month-on-month decline in four months.

In Spain, the construction company SEOP declared insolvency last week, becoming the first major builder to succumb to the credit crunch and slowdown in the Spanish housing sector.

The British property market has also looked wobbly. On Friday, the building society Nationwide will release its house price data for Britain. Economists polled by Reuters anticipate a small decline, which would mark the fifth consecutive month of falling prices.

LONDON: At one point, Alexis Hall had more than 50 pairs of designer shoes and handbags. It never occurred to the 39-year-old media relations executive from Glasgow that her debt would be a problem.

“It was so easy to get the loans and the credit that you almost think the goods are a gift from the shop,” she said about her debt of 31,500, or about $62,000. “You dont fully realize that its real money you are spending until you actually sit down and consolidate your bills and then its a shock.”

As the U.S. economy weakens, many Americans are being overwhelmed by personal debt, but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record 1.4 trillion in debt - more than the British gross domestic product.

By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the U.S. gross domestic product of $14 trillion.

And while the U.S. Federal Reserve Board has cut interest rates, in an effort to loosen lenders grip on credit, the Bank of Englands interest rate increases last year are trickling through to mortgages at the very time home values are dropping and banks are becoming more reluctant to lend.

Until now, debt has mostly been a good thing for Britain. In the hands of free-spending consumers, it fueled economic growth. The government borrowed heavily in recent years to invest in infrastructure, health and education, creating a virtuous cycle: government spending led to job creation, which led to greater consumer confidence and more spending, which, in turn, stimulated economic growth.

Economists say Britains relationship to debt is complex, but at its core is a phenomenon more akin to recent American history than European trends. As in the United States, a decade-long housing boom and strong economic growth bolstered consumer confidence, creating a perception of wealth almost unknown in countries like Germany and Italy.

“Culturally, maybe also because of the defeat in the war, Germans remain reluctant to borrow and banks are often state-owned, pushing less for profits from lending,” said Alistair Milne, a professor at Cass Business School in London.

Since many younger Britons have never lived through a period of slow economic growth, few see the need to hold back on borrowing, not to mention saving.

“The general mantra is spend now, think later,” said Jason Butler, an adviser at Bloomsbury Financial Planning. “Its easier to get a loan or a credit card these days than to get a savings product.”

The average British adult has 2.8 credit or debit cards, more than in any other country in Europe. A growing number are borrowing to pay for vacations, furniture and even plastic surgery. As a result, Britons are spending more than they earn, racking up a household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.

To her parents generation, Hall said, owing money beyond a mortgage was “shameful,” an admission of living beyond ones means.

Debt was also more difficult to get.

That changed in the late 1990s when U.S. lenders, including Citigroup and CapitalOne, pushed into the British market with a panoply of new lending products. Fierce competition among banks meant potential borrowers were suddenly bombarded with advertising and offers for low- or no-interest loans and credit cards.

While British financial regulators watched the explosion of retail lending from the sidelines, their counterparts in Germany and France were more restrictive. As a result, the British market became the largest and most sophisticated in Europe.

The growth was also fueled by soaring demand for debt on the back of rising real estate prices and relatively low interest rates in the late 1990s and early 2000s. Those who did not own a house rushed to join the homeowners watching their properties triple in value.

The trend on the Continent was the opposite. Home prices in most European countries barely moved, mainly because markets were more regulated, there was more housing stock and renting was more popular.

Liz Bingham, head of restructuring at Ernst Young in London, blames the obsession with home ownership on the British “island mentality:” land is seen as a finite good and a valuable asset.

“The housing boom automatically made people feel richer than they actually were and people went on to use the equity locked up in their property almost as a bank account they can dip into every time they want to buy a new car,” Bingham said.

August 14, 2007 — Condй Nast’s Portfolio magazine was hit by another high-level departure as investigative reporter Kurt Eichenwald resigned.

The exit of Eichenwald, a former star reporter for The New York Times, came Friday in the wake of allegations he gave more money than he had previously disclosed to a teenage boy who was the focus of an article on sexual exploitation on the Web.

Eichenwald had previously admitted to sending a check for $2,000 to Justin Berry in June 2005 to help find and rescue the then-18-year-old star in a network of child-porn sites.

A month later, when he realized Berry would be the focus of his Times feature on child porn, Eichenwald said he made sure he got the money back.

The controversy heated up again last week after sealed documents in a child-molestation court case suggested that Eichenwald shelled out an additional $1,100.

Sources said many of the payments were made in $25 increments under a pseudonym to a PayPal account controlled by Berry and a pedophile.

The Times, which like most newspapers prohibits paying subjects for information, has been left red-faced by the scandal.

Eichenwald, his lawyer and a rep for Portfolio declined to comment.

Eichenwald’s article and allegations by Berry have led to the arrest of at least four alleged child molesters.

The alleged pedophile on trial in Tennessee could face life in prison. The payments appear to have been uncovered after lawyers for at least one defendant examined computer hard drives.

Debbie Nathan, who specializes in writing about the hysteria generated by sex-abuse cases, was the first to write about the additional payments.

Eichenwald, who has a feature on a cemetery scam in the new issue of Portfolio, was recruited by Jim Impoco, a former editor at the Times and an Eichenwald ally who was forced out as the magazine’s No. 2 editor last week.