Mark Landler | Frankfurt | September 22

IHT - Fears of an abrupt slowdown in Europe deepened on Friday, after the release of weaker-than-expected economic data and a new record in the euro's relentless rise against the dollar.

Europe's stampeding currency prompted a warning from the plane-maker Airbus that it might have to cut costs more than expected to restore its troubled operations to financial health.

"If the euro remained durably at $1.45, that would mean we have to find €1 billion in additional savings," Fabrice Bregier, the chief operating officer, said in an interview with a French radio station. The euro briefly traded at $1.41 on Friday morning before falling back slightly.

Airbus, which is controlled by France and Germany, is already in the midst of a radical cost-cutting campaign, forced by heavy losses on its A380 jet. Its voice is the latest in a chorus of complaints from French and Italian leaders that the strong euro could choke off European growth.

What concerns economists more, however, is a sharp drop in the monthly survey of purchasing managers in the 13-nation euro zone - evidence that the credit crisis that began in the U.S. mortgage market and infected British and German banks has now seeped into Europe's underlying economy.

An index of purchasing managers in the service sector dropped four points in September, its largest monthly decline ever, suggesting that commerce here is slowing faster than economists predicted.

"It's a bad surprise," said Thomas Mayer, chief European economist at Deutsche Bank. "All this talk of Europe not being really affected by the problems in the U.S. may have been whistling in the wind."

It is far too soon to speak of a recession in Europe, Mayer said. The European Central Bank has put off an increase in interest rates, possibly for the foreseeable future, and injected funds into the banking system to prevent the credit crunch from mutating into a broader financial crisis.

Still, the speed with which the turmoil in the financial markets has registered in the purchasing data alarmed economists. Most are busy scaling back their predictions for growth in Europe next year.
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