Feet firmly planted on the Maginot Line last Thursday, Jean-Claude Trichet reaffirmed the European Central Bank's settled conviction that “the fundamentals of the euro area are sound and the euro area does not suffer from major imbalances”. He admitted “downside risks” to growth, conceding that financial market turbulence might affect the real economy “more than currently anticipated”.

However, he insisted that there should not be too much read into the past month's torrent of appalling eurozone economic data, breezily characterising them as a “technical correction” after strong first-quarter growth and advising sceptics to “look through the volatility in quarter-on-quarter growth rates and monthly indicators”.

When the ECB raised interest rates a month ago, he added for good measure, they had “already priced in” a dip in growth in the second and third quarters, and all information available since then confirmed the wisdom of that decision. At 4.1 per cent, inflation was the enemy to beat, and it would be beaten, in a world of higher food, commodity and energy prices, only by “a change in the behaviour of companies and households”. Just take the medicine, children - though the word “recession” never crossed his lips.

The quiet on the Western Front ended within 24 hours, in a trading blitzkrieg that dumped the euro for dollars. No doubt Mr Trichet would counsel against reading too much into volatile exchange movements, but it is my guess that Friday's striking about-turn - which gave the dollar its best day against important currencies since July 2002 and the euro its worst against the dollar for four years - was not a blip, but the start of a trend.

That is because the ECB's see-no-evil assertion of “sound fundamentals” had the unintended effect of belatedly concentrating attention on just how unsound the eurozone's prospects - and Britain's - now look.

Analysts have been so fixated by America's travails that they barely noticed how rapidly business activity and economic sentiment were collapsing across the Atlantic.

The signs were there for all to read that Europe is heading into a recession from which it will struggle to recover, while America may have got away with a relatively minor economic contraction from which it may rebound sooner than expected.

Take, for an overall picture of activity in the “real economy”, last month's chart from the Institute for Supply Management in the US and compare them with eurozone purchasing managers' index.

On both sides of the Atlantic, business is difficult, beset by higher costs, uncertain demand, inflation worries and fear of further nasty surprises in financial markets.

But in the US, the manufacturing PMI has held remarkably steady through the turbulence, with only short dips below the 50 per cent equilibrium level it is registering. The sector is adding jobs, and, at 54 per cent, export orders are healthy.

More remarkably, the non-manufacturing business index, which includes rental and real estate, came in at 49.5 per cent and, after two months of contracting, the backlog of orders index rebounded to 52 per cent.

Not plain sailing, but not bad for an economy that, badly shaken as it has been by the credit crunch, just chalked up its 81st month of consecutive growth.

Last month's eurozone composite PMI, the weighted average of manufacturing and services output, was grimmer by far: at 47.8 per cent, it was the lowest since November 2001. Confidence indicators are falling faster than at any time since the shock caused by the attacks of September 11 in that year, dropping from 94.8 in June to 89.5 in July.

Retail sales in June fell by 0.6 per cent, and by more than double that in Germany, which accounts for no less than 28 per cent of the eurozone retail market, underlining the fact that the slowdown includes domestic spending as well as foreign demand.

Misery on the housing front, which is by no means confined to the profligate Anglo-Saxons, is part of the story. Housing bubbles have burst in the Irish Republic, Greece, Portugal and, most spectacularly, Spain. With an overhang of 700,000 unsold homes, exposure to Spanish mortgages may be even more unattractive than being saddled with US sub-prime paper.

Business activity has dropped for seven straight months in Spain, as it has in Italy - which confirmed last week that its economy shrank in the second quarter by 0.3 per cent. So have Spanish tax revenues, and, despite fiscal stimulus measures equivalent to 1.5 per cent of GDP, retail sales are dropping like a stone and unemployment is back to double digits.

But the pain in Spain would, it was argued, stay mainly in the Spanish plain. Even when the place was humming, it accounted for only 11.8 per cent of eurozone GDP. That illusion will end on Thursday, when statistics are likely to confirm that not only are Spain, Denmark, Sweden, Italy and Ireland in recessionary territory, with France in the doldrums, but Germany, the eurozone's keystone, is expected to record a fall in GDP over the last quarter of between 0.8 per cent and 1 per cent. That alone would be enough to drag the eurozone average down by 0.2 per cent - and harden sentiment against the euro.

Germany's slide was unexpected and has been precipitous. Early this year its economy was running so strongly against the tide that ministers boasted how much they loved the strong euro.

No longer. Factory orders have fallen for seven months in a row, from within as well as outside the eurozone, to 8.4 per cent below the levels a year ago. Consumer and business confidence have plummeted.

Most ominously, inflation is 3.3 per cent - lower than the eurozone average but high enough to spook Germans, ever mindful of 1920s hyperinflation. Yet German unions are demanding inflation-beating autumn pay settlements. That increases the risk of a wage-price spiral spreading through countries such as Spain, Italy and France, where nominal wages traditionally reflect consumer prices.

The ECB is between a rock and a hard place. If it defends the Maginot Line of price stability, deep and lasting recession is on the cards, yet Mr Trichet insisted last week that it could do no other. He fears that if it wavers, the ECB will be seen to have failed its first serious test. Either way, the euro's joyride is over.

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