Six months ago eurozone finance ministers were crowing about the resilience of continental economies in the face of the credit crisis. This was created by wicked Wall Street bankers and the impact would be largely restricted to the US, they implied. The stern approach of the European Central Bank towards mounting inflationary pressure was applauded and contrasted with the panicky interest rate cuts of the US Federal Reserve.

Six months on, the picture is a bit more complicated. The eurozone economy shrank by 0.2 per cent in the second quarter, figures yesterday showed. This may be what is needed to keep inflation in check but it is now the ECB that could be accused of panic, after raising rates to 4.25 per cent only a month ago.

Meanwhile, those reckless Americans enjoyed a 0.5 per cent expansion in GDP over the same period, helped by the slashing of official interest rates to 2 per cent.

Admittedly, yesterday's US inflation numbers, which saw consumer prices up by 5.6 per cent in July, were hardly reassuring.

And the growth in the second quarter may merely reflect the impact of the Bush Administration's tax rebates.

But there are very tentative signs that the slump in the US housing market may be bottoming out. And Wall Street shrugged off the inflation numbers yesterday as investors reasoned that the sharp fall in the oil price - which was down again yesterday after a brief rally on Wednesday - and other commodities would allow the Fed to keep interest rates low.

Eurozone inflation is also worryingly high, though the July figure was revised down yesterday to 4 per cent from an initial estimate of 4.1 per cent, which some economists said showed the slowdown was having the desired effect.

The eurozone contraction in the second quarter was hardly unexpected given the impact of high energy prices on consumer spending and a slump in business confidence. Some of the fall also reflected an exceptionally strong first quarter in Germany, where output shrank by 0.5 per cent in the three months to June. But there was also a nasty 0.3 per cent fall in France.

The apparent change in economic fortunes on either side of the Atlantic has been reflected in a dramatic swing in currencies over the past few weeks. The dollar has surged against the euro and against the pound thanks to the increasingly gloomy outlook for the UK economy.

It may be that the US economy will follow Europe into the trough once the effects of the tax rebate wear off. But investors are betting that the US authorities' boldness will pay off.

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