4e toasfrington post August 14, 2012 Euro zone slinks toward recession By Howard Schneider The European economy shrank over the past three months as slowing German growth and moribund conditions in France pushed the struggling region to the doorstep of recession. The 0.2 percent slide from April through June included the 17-nation euro area, a currency union beset by twin government debt and banking crises, and the larger 27-nation European Union, a region at the core of the industrialized world and a key market for U.S. products and services. The United States has skirted the worst of Europe's troubles. While growth in the United States has slowed, exports to Europe are running ahead of last year and an unexpected jump in July retail sales gave some hope that U.S. households may strengthen their contribution to the country's tepid expansion. New data on inflation to be released Wednesday could also help determine whether the U.S. Federal Reserve takes more steps to bolster growth. But the latest data from Europe appeared to confirm that the region — and particularly the euro zone — is entering a long-feared double-dip recession, a new downturn that is taking shape before the wounds from the 2008 crisis have fully healed. That will make it harder for nations to contain already-high levels of public debt and for banks to cope with increasing amounts of bad loans, and possibly more difficult for a stalwart nation such as Germany to back the region's various bailout and crisis funds without affecting its own standing in world markets. Critical decisions on the region's crisis-fighting strategy are expected in coming weeks from Germany's Constitutional Court and from the European Central Bank, which recently hinted it was ready to do more to prevent large nations such as Spain and Italy from requiring full-fledged bailouts. Judging from the state of the region's economy, that may be the only way to avoid even worse problems in the months ahead. "