The crisis has presented the European Union with its greatest challenge, but even many committed Europeanists believe that the alliance is failing the test. European leaders, their focus on domestic politics, disagree sharply about what to do to combat the slump. They have feuded over how much to stimulate the economy. They argue about whether the European Central Bank should worry more about the deep recession or future inflation. And they have rushed to protect jobs in their home markets at the expense of those in other member countries.

But although the subprime mortgage crisis began in the United States, Europe is arguably suffering more. The International Monetary Fund estimates that European banks hold more bad assets than American ones and have written down much less. Budget deficits are rising, and unemployment, especially among the young, is already at its highest in 10 years.

Divisions are also evident between northern Europe and southern Europe