With its world-class opera, museums, and galleries, Austria is truly one of the world’s most civilized countries. Vienna, its capital, is a cultural treasure. Indeed, Mercer’s, a major human resources consultancy ranks Vienna as the second most desirable city to live in the world (behind Zurich)—and Vienna is much more affordable. And within an hour’s drive of Vienna, you can visit three different countries: the Czech Republic, Hungary, and Slovakia.

Austria is also a popular haven for English-speaking expatriates. While you won’t find the concentrations of U.S. expatriates that you would in places like Costa Rica, Panama, or London, you’ll find a high quality of life and reasonable living costs. And those costs have come down considerably in the last year, thanks to eroding real estate prices and a weakening euro.

What I appreciated about Austria more than anything else during the two years I lived there is that the cities are built for living. They’re not “urban shells” that fill up during the day, only to empty out at night as workers return to their suburban homes. And they’re built on a human scale that makes them easy to navigate without a car.

I left Austria because it was impossible to obtain a residence permit that permitted me to operate a small business without hiring numerous Austrian employees that I didn’t need. But if you can support yourself without working in Austria, it’s usually possible to obtain a residence permit. Even without one, you can stay in Austria for 90 days on a U.S. passport without any visa formalities.

If you’re interested in possibly living in Austria, I highly recommend a visit to the country. It’s more affordable than it’s been in years. While you’re there, consider opening an account at an Austrian bank—your dollars will purchase 20% more euros than they would have only a few short months ago.

If you want to live full-time in Austria, I’ve recently set up an affiliation with a firm that can help you obtain legal residence there. They can assist with the application forms (in German, naturally), help negotiate the quota system under which most categories of Austrian residence are awarded, and provide introductions to English-speaking real estate agents to find suitable accommodation. Since they’re affiliated with an international tax consulting company, they can even help file your U.S. tax returns.

Source: Austria: Not Just a Financial Haven

The European Commission forecast on Monday that the 15-country Eurozone will grow a meager 0.1% next year – at best.

The global financial crisis has hit Europe like Hurricane Katrina flattened New Orleans. And we expect this is a clear indicator of how the U.S. will fare as we approach 2009.

What this means to investors is that the major emerging markets such as China and India may indeed be the place for their money. China and India are certainly down from the commodity supercycle heyday, but their growth far outstrips what we’re seeing (and can expect to see) in Western industrialized economies.

The European Commission said the Eurozone’s largest economies such as Italy, France and Germany will come to virtual standstill with the prospect of 0% growth.

At the same time, second-tier economies including Spain and Ireland will shrink.

And even though the U.K does not use the euro, the European Commission expects that economy to shrink by 1% – putting it in the same league as the struggling former Soviet satellites, Latvia and Estonia.

That was all the good news in a best-case scenario. The 27-member EU warned that the numbers could deteriorate if money gets even tighter – straining government coffers and virtually freezing consumer spending.

Worse, unemployment could reach 8.4% next year from a decade low of 7% at the end of 2007.

At the same time, government deficits could rise from 1.6% in 2008 to 2.3% in 2009. But some countries may suffer deficits of up to 3% including the U.K., Ireland, France, Latvia, Lithuania, Romania and Hungary.

The EU’s bleak future is characterized by unemployment, deficits and recession – the probable hallmarks of the American economy next year.

Sounding quite naïve (or stupid), Joaquín Almunia, the European commissioner for economic and monetary affairs, actually said that the EU’s interdependence of the global economy is “bigger than we thought, leading everybody to suffer.”

It almost makes the EU sound as though they still cling to the belief that that the world is flat.

While the EU’s forecast may not be a direct reflection of the U.S. economy in 2009, we do believe is provides an undistorted view into the impending future.

But Eric Roseman says the mainstream view of a return to ’70s-style stagflation is not entirely accurate. This time around, on top of surging commodity prices and sluggish growth, we have a full-blown crisis in banking sector and major asset price deflation — we have “inverse stagflation.”

What to do? Stay defensive in underweighted stocks…

The term “inverse stagflation” is not widely quoted among the popular financial press.

That’s because most investors and analysts still believe the industrialized economies are in a period of 1970s-type stagflation. That’s not necessarily the case — a point I’ve argued here in the A-Letter over the last several months.

Inverse stagflation is a twisted version of stagflation. The word “stagflation” is defined as a period of rising inflation accompanied by flat or sluggish economic growth. Stagflation dominated the 1970s when the United States and Europe were caught up in soaring commodity inflation, stagnant economic growth, and rising wages. But it’s not entirely accurate to label the current macroeconomic environment as strictly stagflation.

That’s because this decade, stagflation has an evil sidekick called deflation.

Although the United States and, increasingly, Western Europe are being pulled into stagflation, a growing housing crisis and the contraction of bank credit are deflationary forces working to cool rising inflation; at least to an extent.

Eric says Europe too is being dragged into the same mess. In fact, he thinks it could be facing even more risks, as wage demands creep upwards and a strong currency hurts exporters. Against this backdrop, Eric recommends a defensive strategy for stock investing.

Europe, unlike the United States, currently suffers from a bad dose of renewed wage pressures. In fact, it was those new wage pressures that forced the European Central Bank or ECB to hike rates last Thursday.

Increasingly, the Europeans are being pulled into an economic slowdown. Some countries are already technically in recession, defined as two consecutive quarters of negative GDP growth. Denmark and Ireland are now officially in recession while Spain, France, and Italy are approaching contraction. In England, the economy is also slowing sharply and will likely fall into recession this year.

If falling real estate values and rising food and energy prices aren’t enough for the ECB, the surging euro is causing all sorts of economic challenges.

The single currency continues to strengthen this year, depressing Eurozone exports at precisely the worst time.

Europe is now facing heartache. This helps to explain why stock prices are down more than 20% across the continent in 2008 compared to about a 13% in the United States. Earnings expectations remain too high in Europe. A strong euro also continues to depress European corporate earnings this year and on top of all that, they’re facing weak consumer spending.

Global stocks look increasingly attractive compared to bonds as the bear market intensifies. But it’s still too early to be aggressively shopping for bargains until oil prices cool off.

Europe, like the United States, is now comfortably entering inverse stagflation. This promises to be a volatile summer. Stay defensive in underweighted stocks.

Source: The New Stagflation and His Evil Sidekick Attack Europe