“Europe, which has struggled for more than a year to regain its economic footing, appears on the brink of tumbling back into recession — with Germany, Italy and the Netherlands reporting today that their economies unexpectedly contracted in the first three months of the year,” writes Mark Landler in today’s New York Times.

“The European Union said growth stalled across the 12-nation euro zone in the first quarter, prompting fresh demands that the European Central Bank lower interest rates.”

” ‘The euro zone is stagnating, and Germany, as the sick man of Europe, is falling even further behind,’ said Jörg Kramer, chief economist at Invesco Asset Management in Frankfurt.”

“Germany reported that its economy contracted 0.2 percent in the first quarter, after shrinking 0.03 percent the previous quarter. That meets the textbook definition of a recession — two consecutive quarters of ‘negative growth.’ It would be Germany’s second since 2001, though economists caution that the latest figures are preliminary.”

“Even in good times, Europe’s economic engine tends to run more slowly than that of the United States. Now that much of the European economy seems to have sputtered to a halt, economists are asking how well the rest of the world can run without it.”

” ‘We have to take it very seriously,’ said Stephen S. Roach, the chief economist at Morgan Stanley. ‘The world doesn’t have much of a growth cushion. So when we have shocks like SARS in Asia, and Europe seemingly falling into recession, it could push the global economy into recession.’ “

“Though the United States has been a reliable motor for the rest of the world, Mr. Roach said that with a growth rate of less than 2 percent, it could no longer be counted on to drag along Europe and Asia.”

“Indeed, the United States is indirectly aggravating Europe’s misery, through the dollar, which has tumbled 26 percent against the euro in the last year. That could hobble growth in Europe by making German cars, Italian shoes and French wine more expensive in the American market. The euro resumed its rise against the dollar today, settling in New York trading at $1.1511, up from $1.1399 late Wednesday.”

“Yet the surging euro is, in some ways, the least of Europe’s problems. Germany and France are plagued with chronically high unemployment, and with what bankers and industrialists see as calcified labor markets and cradle-to-grave social welfare programs that are increasingly unaffordable in an era of big budget deficits.”

“Already, France and Germany have breached European Union rules that limit the size of budget deficits at 3 percent of the gross domestic product.”

“Many economists say that to lift these economies out of their sluggishness, Europe’s major countries need to undertake an array of changes that will shake up their labor markets and reduce the role of the state in the economy.”