Can the U.S. Survive a Recession in Europe?

By Jeff Cox, CNBC.com Staff Writer

Even with the European Union economy almost certainly headed for recession, hopes are growing that the U.S. will be able to escape the worst of the sovereign debt storm and keep moving on a slow-growth trajectory.

"Slow," of course, would be the operative word, as even the most optimistic economists don't put 2012 growth at much better than 2.5% or so.

Yet even that is an improvement from the sentiment of just a few weeks ago, when fears ranged from a mild recession all the way to depression as a combination of global and domestic debt problems seemed to all but assure an imminent crisis.

"A mild (European) recession is probably already baked in and most of the peripheral nations are already in recession," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. "The fact that we could get some sort of a coordinated plan by the EU at the coming summit helps cushion a severe recession in Europe. That means that we continue to grow at a modest pace."

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The reason for the hope is in itself tepid. Recent economic indicators have shown gains in consumer confidence, housing prices, and, most significantly, unemployment. Of 21 economic reports released last week, 10 beat expectations, nine missed and two were inline.

Not exactly the stuff of which booming economies are made, but it at least brings the U.S. back in from the brink.

"While the European debt crisis seems to control markets on a day to day basis, the daily headlines are overshadowing what is probably the most overlooked macro trend of 2011, and that is a shift of economic leadership from the rest of the world back to the United States," Paul Hickey, co-founder of Bespoke Investment Group, said in an analysis. "While the rest of the world has been stumbling, the U.S. economy has been slowly drifting higher."

Even some of the most bearish opinions are starting to acknowledge that while the U.S. economy has plenty to overcome, it can survive, at least for now, a European recession.