Europe's Economy: Falling Down

Over the past year, at a time when the world economy has been buffeted by the U.S. housing and financial crisis, slowing growth in most developed nations and soaring inflation everywhere, one of the big surprises has been Europe's relatively strong performance. The picture has been uneven, with countries such as Spain and Italy — and increasingly the U.K. — running into problems. But overall growth, especially in the 15 nations that use the rapidly appreciating euro, has confounded the skeptics. In early June, the International Monetary Fund actually revised its 2008 growth forecast for the euro area sharply upwards, declaring...