Berlin - Despite sagging global growth, soaring oil prices and the threat of renewed turmoil hanging over share markets, Europe appears to have managed so far to weather the storm unleashed by the upheaval in the US housing market and fears of a major world economic slump.

But now more than nine months into the international financial crisis, another picture appears to be emerging with the global credit crunch triggered by a surge in defaults in risky US mortgages helping to forge a new economic divide in Europe.

In a sense the lingering credit crisis is helping to shape a new two-speed Europe with the current economic uncertainty adding to the European growth risks posed by resurgent inflation, stagnating consumer spending and a contraction in exports.

"This year there will be a growth divergence between the European countries," said Rainer Guntermann, European economist with the investment house Dresdner Kleinwort.

Indeed, while solid export demand from the world's leading emerging economies has helped to power growth in Europe's biggest economy, Germany, the credit crunch has already hit countries such as Spain, Ireland, Britain and to a lesser extent France where up until recently booming property markets have been a driving economic force.

Now with prices plummeting, the fallout from the US mortgage market crisis appears to be spreading to Europe, consequently threatening to engulf the European construction sector, undercut economic confidence and ultimately drag down economic growth.

"Some economies are in big trouble," said Kenneth Wattret, BNP Paribas' chief eurozone economist.

With the ripples from falling house prices spanning out across the British economy, the nation's economic growth rate is likely to shrink to about 1.6 per cent in the coming year after it basked in a more buoyant expansion rate of 3.1 per cent in 2007.

Having enjoyed a robust 3.8 per cent growth rate last year, Spain is facing the possibility of its expansion rate almost halving in the coming years as the country's once buoyant property market heads for a hard landing.

In the case of Italy, the downbeat global economic outlook appears to be compounding the problems that have been building up in recent years in the 15-member eurozone's third biggest economy.

Even during the world economy's recent more prosperous times, Italy has struggled to chalk up convincing economic growth rates with the surge in the euro again serving to underscore the international competitive problems facing the country.

This includes sectors such as textiles and white goods which are facing up to tough rivals from emerging economies.

While business confidence in Germany and France posted a surprise rise last month, the mood among executives in Italy sank to its lowest level in two and half years.

The new economic fault lines surfacing across Europe also add to the dilemma confronting the European Central Bank, which up until now has resisted following the moves to lower interest rates launched by the world's other major central banks, including the US Federal Reserve and the Bank of England.

For the moment, with the euro hovering around all-time highs of about 1.60 dollars and surging crude oil prices stoking inflation worries, the ECB appears to be trying to buy time on rates insisting that combating inflation remains its number one priority.

Even if Germany's solid economic performance might help to hold up Europe's aggregate economic data, analysts say a downswing in other smaller eurozone member states is likely to result in increased pressure on the ECB to begin trimming rates to bolster economic growth later this year.

"The underlying story is that the eurozone is slowing," said Wattret. "It is very likely the economy will have a tough year."

This includes Germany with economists expecting the country's growth rate to slow well below 2 per cent this year along with the risk of an abrupt downward correction in key indicators in the coming months. The eurozone is expected to turn in a similar performance.

But the real concern for the eurozone's members is that the squeeze on the currency bloc's consumers as a result of high food and energy prices will continue making them reluctant to spend just as exports slump in the face of declining global economic growth. (dpa)