A recession in the US now appears to be a given, following the devastating terrorist attacks on New York and Washington. And as the old adage goes: if America sneezes Europe catches a cold.
There are serious questions too about the impact on global trade, foreign direct investment, tourism and consumer and business confidence.
Central bankers are keen not to talk up the possibility of recession and a series of senior European central bankers went public during the week in a bid to reassure the public. And it is likely that they will back up their words with actions. Interest rate cuts, above and beyond what was thought likely just days ago, are now on the cards. And the probability is that they will be co-ordinated, just as they were following the Wall Street Crash.
However, the European Central Bank (ECB) president, Wim Duisenberg, told a European Parliament committee on Wednesday that a swift move to cut official interest rates would promote panic rather than calm. The ECB is still expected to cut interest rates but probably not before similar action by its US counterpart, the Federal Reserve. Both are likely to wait for more evidence of the extent of the impact of Tuesday's events on the global economy.
Mr Duisenberg also warned that the turmoil in markets from the terror attacks could have long-term financial consequences but it was premature - he suggested - to make any firm judgments in this regard.
Central banks are doing their best to ensure there is no chaos in the operation of the global financial system. The banks have been pouring billions of dollars of liquidity into the system to ensure sufficient funds are in circulation to ensure financial obligations are met in a timely fashion. The amounts are more than 10 times the daily average and increase liquidity to an extent that it is the equivalent of cutting interest rates.
This action, combined with the Federal Reserve's call for central banks to desist from trading the dollar, has led to a reasonable amount of stability in the markets, considering the scale of the devastation earlier in the week.
However, it is over the coming weeks that the system will really be tested and no one knows for sure how it will cope when the US markets next week. Nevertheless, the central banks are determined to keep up the flows of whatever money is needed and then almost certainly to cut interest rates.
Central banks also said they were ready to take further action as necessary, triggering speculation that the G7 could co-ordinate joint intervention to support the dollar, should it dive again as it did immediately after the attacks.
This formula of increasing liquidity and cutting interest rates has worked on two previous occasions - following the 1987 stock market crash and the Asian crisis a decade later. On both occasions the combination led to better than expected growth the following year.
As a senior German central banker, Mr Klaus-Dieter Kuehbacher, noted, "a co-ordinated interest rate cut with the US Federal Reserve could have a positive psychological effect."
This is the hope of many analysts. Mr Oliver Mangan, an economist at AIB, said there is some optimism that while the downturn will be sharp, the corresponding upturn that is expected next year will be just as steep if not steeper. However, others fear a more negative scenario.
Certainly it is very early to make any reliable predictions about next year given that the scale of US retaliation for Tuesday's attacks and the knock-on impact of such action on the financial systems is not yet clear. What will be of vital importance is whether or not any retaliation disrupts oil supplies.
In the immediate aftermath of the attacks, the markets drove the price of oil up by more than $3 on the fear that supplies would be disrupted and that prices could quickly head back up towards $40. Higher oil prices have already contributed to much of the slowdown the global economy is now experiencing and further rises would certainly make any recession or slowdown far deeper than would otherwise be the case.
However, by Wednesday prices had started to fall back towards $28, as OPEC made it clear it would increase supply to keep prices at that level. The logic, according to Mr Mangan, is that so long as Saudi Arabia and the United Arab Emirates are kept out of any conflict, supply should not be badly hit.
According to Mr Michael Karagianis, chief strategist with Aberdeen Asset Management, comparisons with the late 1990 period of the Iraqi invasion of Kuwait are a useful guide. Then, US economic growth had already started deteriorating in 1990 while oil prices more than doubled to above $40 a barrel, gold increased in price and the dollar weakened approximately 10 per cent. These prices unwound within two months but the impact on the economy was far longer lasting. Global equity markets lost 20 per cent within two months and did not regain earlier levels for a further two years. US GDP went sharply negative for two quarters after the market impact, not turning positive again until the June quarter of 1991.
The difference now is that the economy has already begun to slow and equity markets to fall.
But the other problem, as Mr Karagianis admits, is this time the attack is on US soil at a time when US consumer confidence is already fragile. And almost all observers agree that the impact on confidence is likely to be very significant.
The consensus among European policymakers now appears to be that a short-term recession in the US is inevitable with two consecutive quarters of negative growth.
On Thursday it became clear that the euro zone came perilously close to zero growth in the three months to June when the economy ground to a near halt, rising by a mere 0.1 per cent compared with the previous quarter. On an annual basis, growth slowed to 1.7 per cent from 2.4 per cent in the first quarter, confirming that the effect of the global economic slowdown had been greater than predicted at the beginning of this year.
And prospects are deteriorating. The German Bundesbanker, Mr Kuehbacher, has warned that he saw no pick-up in the Germany economy this year. Prospects in Italy are little brighter.
The problem will be how badly confidence has been dented and how quickly it can be restored. The Government here will be looking closely at this. US tourism will stop for some time and will have negative implications for short-term spending across the globe.
There are also questions about the likely impact on US business confidence and on US multinational operations outside North America, while there is likely to be some retrenchment in US foreign direct investment. Other commentators are even more worried and say US firms may simply put off all international investment until the situation is clearer.
In the short term, there will be substantial implications for most stock markets with the consequent knock-on losses for many individuals, some of whom are already in negative territory. What seems certain in the meantime is that the downturn in the Irish economy and Exchequer finances will continue over the coming months, increasing the problems facing the Minister for Finance, Mr McCreevy, in compiling the Budget in the ongoing round of Departmental estimates.
Already the Exchequer finances are in serious trouble with tax revenues only running 4 per cent ahead of last year and Government spending up 24 per cent. Further loss of revenue from tourism and possibly further retrenchment by the US multinational sector is the worst possible economic news in these circumstances.