World leaders and financial experts were not surprised when the UK and the US entered deep recessions, and some were even smug enough to suggest that it would not hit their own country as their economy is not based on ‘a property boom and massive consumer debts’.

The countries on continental Europe have prided themselves on a preference for safe banking and a reliance on manufacturing rather than services, and thought they would emerge the global credit crunch relatively unharmed. But now both France, Italy and Germany have seen their GDP shrink at a faster pace than Britain. Europe biggest economy, Germany, saw it’s GDP shrink by 2.1 % in the last three months to December compared with Britain’s 1.5 %. Italy and France saw GDP drops of 1.8 and 1.2 respectively. How must President Sarkozy feel now, a few weeks after his patronizing comments about Gordon Brown?

Europe’s manufacturers are being hit by the global recession. Car sales have slumped as people spend less and save more as unemployment looms and the Chinese have ceased buying several goods made in Europe. When an economy relies on manufacturing and export, it will get hit hard when export slows down and the manufacturing doesn’t. This is in particular true for the German economy. So now, the VAT cuts introduced by Mr. Brown probably doesn’t look as feeble as earlier