Europe is in deep doo-doo...

Their over-valued Euro makes life even tougher for them...

Factory output plunged by a record 12pc in December year-on-year. Spain suffered the steepest fall of countries in the Eurozone with a 20pc drop. Among non-euro countries, the biggest declines were led by Latvia (-21pc), Sweden (-18pc) , and Romania (-17pc).

"What's completely new is the extent and speed of this crisis. The credit crunch is a reality, and even member states are having trouble financing their debts," said industry commissioner Gunther Verheugen.

"Blind activism is not going to help. EU states and the commission must not take on the role of white knights. We don't have a single euro in our budget to save companies. The financial options of the EU and member states are reaching their limits."

Julian Callow, from Barclays Capital, said an over-valued euro had slowly "hollowed out" Europe's manufacturing core over the last two or three years. "It takes time for currency effects to feed through. The damage was concealed during the global boom but the collapse in demand has exposed the vulnerabilities. We going to see a prolonged period of de-industrialisation," he said.

The commission said core sectors such as shipbuilding might never recover from the slump as Asian competitors lock up the next round of orders by offering "unfairly low prices". "European yards do not have the means to withstand a price war or to operate at below costs for long", it said. Europe still has 150 ship yards supporting almost 450,000 workers, and control 35pc of the global market.

The car and truck industry are in dire straits. Orders for heavy duty vehicles collapsed from 38,000 last January to 600 in November. The report said car sales may fall a further 18pc this year, cutting output by 2.5m vehicles. This has led to knock-on effects across industries. Flat steel orders have dropped 57pc. Ominously, Europe's steel output (-19pc) is falling at twice the global rate (-10pc).