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In the kitchenware department of Paris' famed La Samaritaine store, Herry Andriavaloherinaiva, 35, is looking intently through the racks of ceramic bowls and cloth napkins. Like thousands of other Parisians mobbing the stores during the after-Christmas sales, Andriavaloherinaiva is braving not just France's frosty weather but an equally chilly economic climate in his pursuit of a bargain. He is unfazed by the downturn that has led some economists to predict France's GDP growth could be as low as .9% in 2003. "I'm not worried," he says. "I still have the same spending pattern as always."

But many government and industry types are plenty worried. Beset by feeble growth and preoccupied with the possibility of war with Iraq, the euro zone's major economies are stuck in an economic rut — one from which, at least in the short term, they look unlikely to escape. Business investment has declined. Governments are hamstrung by budget deficit restrictions imposed by E.U. authorities. And crucially, the resilience of Europe's consumers — whose spending accounts for 58% of GDP in the region — is coming under increasing pressure, even in shopping stalwarts like the U.K. "Well, things could be worse," says Robert Prior-Wandesforde, a European economist at HSBC, with what passes for optimism. "It doesn't look as though Europe is going into recession."

That might not be true of Germany, which accounts for 30% of euro-zone GDP. Last week, Germany's statistics office estimated that in 2002, Europe's largest economy grew just .2% and could have had negative growth in the fourth quarter. Neither France nor Italy, the euro zone's second- and third-largest markets respectively, looks likely to have done much better, with 2002 growth estimated at 1% and .4% respectively. And this year? The German Institute for Economic Research estimates 2003 growth will be .6%, possibly kicking off with an economic contraction in this quarter — technically, that would be a recession if the previous quarter turns out to be negative too. Recession or not, the growth figure is well down from Economy and Labor Minister Wolfgang Clement's forecast last autumn of 1.5%.

Even the good news has a hitch. In Germany, 2002 exports were up by 2.9%. But in 2003 the strength of the euro, which last week reached three-year highs against the dollar, will make exports more expensive. "In any global upswing," says Holger Schmieding, the London-based chief European economist for Bank of America, "Europe is likely to underperform the rest because of the currency."

If you want to hear better news go to Italy, where government optimism is in overdrive. Officials there have predicted growth of 2.3% this year — although financial analysts expect the number to be closer to 1.4%. And in France, economists are equally skeptical of Finance Minister Francis Mer's prediction that the economy will expand 2.5% in 2003. They think it is more likely to average just over 1.5%, with some predictions as low as .9%.

The natural reaction of any government faced with such stagnation: kick start the economy by cutting taxes and maintaining public spending. Trouble is, euro-zone governments are hobbled by the terms of the Stability and Growth Pact, which proscribes a budget deficit greater than 3% of GDP. Last year in Germany, declining growth and higher expenditures on things like unemployment meant the government ran a federal budget deficit of 3.7%. This year, in order to comply with an order from Brussels to clean up its fiscal act, Germany has raised taxes. "It's stupid," says Jean-Paul Fitoussi, president of the Observatoire Français des Conjonctures Economiques, an economics think tank. "How can a country with zero growth implement a restrictive budget?"

That's a question that France — which has already been involved in a face-off with Brussels over the pact's restrictions — may also have to answer. The program that President Jacques Chirac unveiled when standing for re-election last March assumed 3% growth over the next five years. Chirac told voters that such expansion would allow him to cut income taxes by a third, lower some corporate rates, and boost spending on police and defense. But if he keeps his promises, it will be impossible for France to toe Brussels' line.

In the past, Chirac has had a major economic force pulling in his favor — French consumers, whose spending could qualify as patriotic. It's a resilience not unique to France, though. Says Fitoussi: "What we're seeing in the O.E.C.D. economies is the stagnation and decline of investment. The only thing that's prevented U.S. and European economies from nose-diving has been the strength of consumer spending." In France, the consumer outlook has held steady. But spending in November declined 1.7% from the previous month, so analysts are anxiously awaiting December results.

German consumers have already surrendered. According to retail giant Metro, 2002 was the worst year for German stores since World War II. The consumer sentiment index has dropped to the same level as in recessionary years 1993 and 1996.

Nor is Britain insulated from uncertainty. Over the past two years, consumer spending has been buoyed by the country's strong housing market, and from April 2001 to April 2002 — when monthly same-store sales grew by an average of 6% — the spending boom was nothing less than phenomenal. But real estate is now facing a slowdown; and like-for-like retail-sales growth fell from 4% in October to 1.7% in December. Should consumer spending tank in Britain, though, the government still has one distinct advantage over its euro-zone neighbors — the ability to spend what it likes without running afoul of Brussels. In 2002, Chancellor Gordon Brown unleashed a raft of spending initiatives that will underwrite GDP growth of almost 2% this year.

To listen to economists, there are two things that could help lift Europe out of its doldrums. In the short term, there's a war. Not a protracted, recession-inducing war, but a decisive war that comes and goes soon. Such an event would remove the geopolitical uncertainty from the economic equation, which in turn would boost consumer and business confidence. It would cause an updraft in the American market, which would help European exporters. And it would drive oil prices down, making life cheaper for consumers and manufacturers. According to Christian de Boissieu, professor of economics at the Sorbonne and the head of Paris' Chamber of Commerce economic forecasting unit, French growth could certainly average 1.8% this year, "if there's a war, and it's short. But if it's not over quickly, our scenario is over-optimistic."

The second thing? A recession so severe it forces governments to act. It sounds perverse, but economists say that structural and regulatory problems in Germany and France still stand in the way of any robust upturn. That's why a deep and ugly recession isn't being viewed negatively everywhere. Says Michael Hartnett, director of European Equity Strategy at Merrill Lynch: "It would be great news if Germany went into a humiliating recession. We are always buyers of humiliation, an emotion that invariably forces positive changes on sectors and countries." If the current trend accelerates, his wish might be granted.

• JENNIE JAMES/London
• Rosy economic projections are being undone by slowing consumer spending and rumors of war