When Up is Down.

Only last spring it was fashionable for Europeans to argue that when America sneezes, Europe no longer catches the flu. The nations of a uniting Europe are slowly "decoupling" from America, trading increasingly among themselves, carving their own economic path. Europe is increasingly impervious to U.S.-born viruses, or so it thought. Then the tech market headache hopped the Atlantic last spring. The chills of recession followed close behind. Now come signs of a surprisingly early U.S. recovery, but not all Europeans are feeling better. Indeed some economists worry that America matters too much. An American revival would draw investors to the dollar, and away from the euro notes introduced on New Year's Day. The currency, hailed by French President Jacques Chirac as "a victory for Europe," would be battered shortly after its birth.

It might seem obvious that U.S. recovery should be good for world economic health. In general, of course, it is. But one's hopes for the strength and timing of the recovery also hinge, quite reasonably, on where one lives. After shrinking a little last year, the U.S. economy could grow as much as 4 percent this year, according to the most recent and optimistic forecasts. That 5 percent upward swing would raise global GNP by 1 percent, a $500 billion boost that could make the difference between good times and bad. In much of Asia, where a strong America is not only a crucial export outlet but a welcome counterweight to both a sinking Japan and a rising China, this would be a clear windfall. In Europe, however, it could be less opportune. "From a European perspective, we don't want the U.S. in recession but we don't want it scorching away the way it has for the past five years," says Robert Lind, chief European economist at ABN Amro bank in London. "The big problem is if we see growth in the U.S. of 4 percent or more."

So how does a boom become a problem? U.S. growth at that pace would tend to strengthen the dollar and weaken the euro. That would pressure Europe's Central Bank to raise interest rates (hoping to lure investors back to euro-based securities), which in turn would choke off European business and consumer spending. If it recovers too fast, American growth could have the perverse effect of slowing European growth. This is far from certain. But many eco- nomists now believe the recession will be V-shaped, implying a rebound as sharp and potentially unsettling as the fall.

America's high-octane boom of the late '90s has made everyone newly wary of excessive growth, because it set the stage for the 15-month stock-market crash that began in March 2000. It took a year for the U.S. eco- nomy to begin contracting. Businesses suddenly stopped investing in Internet gizmology, and the lingering effects of the oil- price shock spread the pain. Europe was soon brought up short by similar shocks. Europe also suffered from rising food prices, due in part to the mad-cow scare, and tight money policies from the new European Central Bank compounded the squeeze. The crash of the dot-coms was magnified in Europe by government auctions peddling access to "third generation" Internet pathways, which ended up saddling the winning corporate bidders with multibillion-euro debts. Many Europeans still point to these crippling symptoms as evidence of how different their recession is from the American strain. Says Keith Church of Oxford Economic Forecasting, "Our slowdown doesn't have much to do with their slowdown."

Not much--except that the tougher times spread from America. True, Europe does trade increasingly within its own borders. But a recent analysis by HSBC shows that in the year ending last September, a dramatic slowdown in U.S. import growth probably knocked about six tenths of a percent off the GDP of the 12 nations of the euro zone. Since September 11, shrinkage in the airline industry alone was enough to cut another two tenths percent off euro-zone ...