A McDonald's in London
A McDonald's in London - 
Listen To The Story


Kai Ryssdal: If it's any consolation for cash-strapped Americans, things actually look worse on the other side of the Atlantic Ocean. Because European economists are starting to use the R-word. New figures out today show the 15 economies that use the euro shrunk in the second quarter of the year. That's the first time that's happened since the single currency was created back in 1999. And just as Europeans have been feeling our pain, we're going to be feeling theirs.

From the Marketplace European desk in London, Stephen Beard reports.

Stephen Beard: It wasn't supposed to be like this. Pundits said the U.S. would slide into recession first, while Europe carried on growing. But today's figures tell another story. The German economy shrank by 0.5 percent in the second quarter. France and Italy also slipped. Between them, they dragged the whole euro zone down into negative territory. A drop in consumer spending and a fall in exports are to blame. Carol Olney is with Merril Lynch. She says the U.S. and Europe have traded places.

Carol Olney: It does look like the euro zone has a chance of actually slipping into a mild recession. The market seems to have suddenly got very depressed about the euro zone and much more relaxed about the U.S.

Which hardly seems fair to those Europeans that blame the U.S. for the credit crunch and other related ills. Economist Jorg Radeke says the U.S. enjoys two big advantages over Europe.

Jorg Radeke: What we didn't have in the euro zone is a central bank which supported the economy with interest rate cuts, for one thing. And we didn't have any tax cuts and other benefits.

That may change if the euro zone does slide into recession. But the U.S. better hope that it doesn't and that European demand doesn't fall off any further. Exports are one of the bright spots in the U.S. economy, and Europe remains one of the biggest markets for American goods.

In London, this is Stephen Beard for Marketplace.