The fears over a declining housing sector were highlighted again this week with Bovis, one of the UK's leading house builders calling on the Bank of England to cut interest rates to ease pressure on the beleaguered sector. Bovis CEO Malcolm Harris called for a 0.75% cut in interest rates to 4.5% as the company announced a fall in profits of 6% and a warning that 2008 could be worse if the current level of interest rates prevailed.The comments come on the back of a catalogue of indicators all adding to the pressure for the Bank of England to take action.

Ever since the current downturn was triggered in the US by the sub-prime mortgage crisis which, for UK investors turned into the Northern Rock debacle, credit markets and house prices have stumbled into uncertainty. The situation has been compounded by the fact that whilst the US Federal Reserve moved to cut interest rates to ease the pressure on Domestic mortgage holders, this did nothing to help a weakening dollar that has struggled to maintain levels due to the worries over funding for the Iraq and Afghan conflicts. The E.C.B., European Central Bank has been conspicuous by its silence and has been unwilling to take any steps to assist the dollar, seeming quite happy to see the value of the Euro soar against, not only the dollar, but also sterling and other major currencies.

It may take the knock- on effect on the housing markets across Europe to stir the E.C.B. into action and force a rate cut as economies across the globe follow the US in their fears over recession. If the central bank were to cut rates this would have a knock on effect that would see the the oil price fall further helping recessionary fears in the US.

So what are they waiting for? Its a little like Nero fiddling whilst Rome burned. Could it be that the now vastly diverse economies of Europe, that span 25 very different economic stages of development, is proving too difficult to manage with only one hand on the tiller.

One of the major fears when the Euro was launched was that, although the different economies had met converging economic standards, the sheer complexities of managing them, emerging against mature, would make setting interest rate policy difficult. Rate movements could be seen to hurt one member country whilst benefiting another. This inability to please all member countries, all of the time meant that political influence may come to bear on the ECB when the stronger members were in trouble at the expense of the poorer members.

It seems that rather than claims to be acting partially, the central bank has opted to do nothing and this sitting on the fence could now be seen as being the straw that breaks the camels back, economically speaking. By the time the bank acts to cut rates it may be too late to stave off recession on a global basis.

I am sure that it is at times like these that the UK decision not to join the Euro and give up its ability to set its own domestic interest rates must seem like great foresight. It is surely a fact the the UK economy for all its posturing calls for rate cuts by industry, is in a much better position to act based on domestic indicators that benefit only itself. The rest of the world waits to see if Brussels has the 'cojones' to act decisively. I fear we may be waiting some time.