European business has been praying for a stronger dollar and a weaker euro. To the horror of Europe's central bankers, that is starting to happen, for the worst of all possible reasons.

As the euro's exchange rate against the dollar rose this year to almost $1.50, Europe's exporters found themselves priced out of more and more markets. The fall in the dollar meant an equal fall in the Chinese RMB, making their exports to Europe cheaper, and so eurozone businesses found themselves facing cheaper competition both at home and abroad.

The euro has now declined for the alarming reason that the markets are starting to wonder whether the eurozone can hold together. The euro has been under pressure because of the growing fear in the markets that a number of countries that use the euro are heading into trouble.

Greece is the best-known crisis, with its government debt downgraded and its spreads widening ominously and the new center-left government terrified of the kind of austerity that could provoke labor unrest, however much it may be needed.

But other small eurozone countries are in trouble, starting with Austria, whose banking sector has just been rocked by the need to nationalize Hypo Alpe Adria bank, the country's sixth-largest bank. It is the Austrian arm of the Bavarian bank Bayern LB, which took a $3 billion hit with the writedown. The problem was the predictable one of overexposure to Eastern European and Balkan borrowers, the same problem that looms ominously over Austria's biggest banks.

"Our stress tests show that capital adequacy levels must be raised further in the medium term. This applies to both the quality and the amount of banks' own funds," noted Austrian banking supervisor Andreas Ittner.

Oesterreichische Volksbanken, the fourth-largest bank in the country, announced last week that there was no need for it to be nationalized. This less-than-reassuring statement followed reports that the central bank had put it too under surveillance.

There is renewed nervousness over two of the biggest banks, Erste Group and Raiffeisen, despite Erste's impressive profits this year. This is because the markets simply do not know the scale of the losses and bad debts for the banks' Eastern European subsidiaries, because of an accounting rule that lets Austrian banks value asset prices at cost so long as they are counted as fixed assets.

"Eastern Europe" is a worryingly vague term that lumps together strong economies like Estonia and Poland and mature ones like the Czech Republic with heavily indebted problem countries like Lithuania and Hungary. But the more a bank has exposure in the Balkans, as Austrian banks tend to do, the more ominous the outlook. Greek banks are also heavily exposed to the rickety Balkan economies.

Even Slovenia, long reckoned the strongest of the former Yugoslav states, is reeling after this year's crisis at the Istrabenz finance group. That brings us back to the troubled Hypo, whose leasing arm had a third of Slovenia's leasing business and more than half of its mortgages. Like all the other Balkan states, Slovenia's property markets and its construction industry have collapsed.

We have been here before. There was a similar spike in alarm over Austria's banks in April, which eased when German officials acknowledged that they might not like it, but the stronger eurozone countries might have no choice but to bail out their weaker brethren. That calmed the markets but the same problem is reviving because the prospect of Greece, Austria, Slovenia and possibly Spain all needing support at the same time is daunting even for the Germans.

Germany fears that it could be entering the second plunge of a double-dip recession, after industrial production fell in October from September, having risen throughout the summer. Industrial orders were down 2.1 percent. Overall, German output slid 1.8 percent in October from September, while production fell by 1 percent in France, which had seemed on the road to recovery.

The EU's own statistical arm, Eurostat, reports industrial production in the 16 countries that use the euro declined 0.6 percent in October from September and was down 11.1 percent from the year-earlier month. And the total number of employed persons in the eurozone fell 712,000 in the third quarter, compared with a 702,000 decline in the second quarter. No wonder the EU's Eurobarometer poll found most Europeans, 54 percent, "believe the worst is still to come regarding the impact of the crisis on jobs."

The EU Commission agrees. EU unemployment is current 9.8 percent, but the commission reckons it will rise to 10.7 percent next year. And despite claims of a modest recovery, the commission is forecasting that some important economies, notably Holland and Spain, face accelerated GDP declines in the new year.

The key fact is that the very modest recovery of the past six months has come in Europe, as in the United States, at a very steep price. Between them, the United States, Japan and the EU countries borrowed $4 trillion this year to pump into deficit spending to keep their economies afloat. They will be borrowing as much again next year, and that is without counting the separate stimulus measures taken by the various central banks to flood the system with liquidity.

These are huge sums and cannot be long sustained. The plan has always been to stop the deficit spending once the private economy recovered. The fear now, with the added problems of Greece and Austria and the Balkans, is that the private sector is not recovering nearly enough, which in turn puts a big question mark over the ability or the will of Germany and the European Central Bank to mount any rescue.