It is telling that the United States has cut interest rates sharply five times and has a massive tax cut on the verge of adoption, while Europe has largely busied itself with noting each negative statistic in excruciating detail. Finally, Europe's social-welfare model has fostered a rigid labor market that makes Europe uniquely unable to react quickly to changing economic conditions. Making matters worse, the Commission is flirting with strengthening these labor protections. Such blatant antibusiness policies will only encourage capital flight, weakening the euro and prolonging Europe's downturn. What will make Europe's coming recession particularly robust and resilient are the overlapping natures of events and European policies.
Poor policies drive away investment, which weakens the euro.
A weakened euro raises the cost of imports, strengthening inflation. Higher inflation limits new investment, leading to layoffs. In social-democratic Europe, that triggers support for policies supporting workers rights, which starts the cycle again. The first casualties will be the states to the Union's east that are busy lashing their economic, political and legal systems to the Union's framework. These states will soon discover that while membership has its privileges, it is not risk free.