Quite apart from the weather, agreeable surroundings, excellent food and sensibly-priced alcohol, the continentals' mastery of the art of living is a pleasure to experience.

The prosperity needed to pay for this lifestyle is plain to see, whether lounging on a Mediterranean beach, sitting on a cafe terrace or holding up a hotel bar. Why on earth, then, is the European economy often talked of as a "sclerotic" basket case . . . with its suggestions of a chronic system disorder?

Many continental economies have real problems. Political weakness has limited efforts to tackle the most serious of these, sapping confidence. Self-belief has been further weakened by a perception that Europe is falling behind the US and, in particular, Asia.

Add into the mix visceral Europhobes who are only too happy to talk Europe down, and you can see how the myth of a deadbeat region has come about.

But if this silliness is ignored and the hard facts examined, a truer picture comes into focus. Take the most basic indicator:

economic growth. Often, after looking at headline rates of growth, it seems as if the EU can barely manage plodding expansion compared to the only comparable economy, the US. But factor out America's faster population growth and things change.

GDP per head, the most important indicator of prosperity, has grown only slightly faster in the US over the course of the current decade.

Another frequently parroted claim of the eurobashers is that the business environment crushes enterprise and throttles wealth creators. Few would disagree that more needs done to cut red tape and ease the regulatory burden, but this could be said of any economy: ask Americans about Sarbanes-Oxley accounting compliance.

Forget the cliches and look at the facts. There is no better measure of business conditions and exploitable opportunities for profit than the extent to which foreigners want to invest in an economy. On this score, Europe's performance is stellar. Between 2000 and 2005, the inflow of foreign direct investment to EU-15 countries was $250bn, close to half of the global total.

And why is old Europe such an investment magnet? Simple. It's a good place to make a buck.

Corporate America is by far the region's biggest source of inward investment. In 2004, US affiliates in the EU-15 booked profits of $84bn, of which Ireland accounted for more than $10bn. That is 24 times more than the $3.5bn they made in the endlessly hyped Chinese market.

Strong profitability . . .

equity returns in Europe have consistently outperformed those in the US over decades . . . has also allowed European firms to finance massive foreign expansion. According to the UN, 13 of the world's 20 biggest non-financial multinationals ranked by foreign assets, four from the US and three from Asia.

While some continental politicians view globalisation as a threat, European corporate executives are in its vanguard. And even as they swap their suits for Speedos this August, they are unlikely to be resting on their laurels. The rate of investment out of Europe to acquire foreign firms is rising fast, as soaring spending on cross-border merger and acquisitions in 2006 attests.

What about European competitiveness? The ultimate measure is an economy's share of world export markets. Since the beginning of the decade, EU-15 economies have increased their share from 18.5% to 19.9%, despite the rise of hyper-competitive China. Europe's lead in internationally traded services is bigger still.

What about jobs? Here, the "euro-sclerosis" brigade is on to something. Though the claim that Europe is not creating jobs is nonsense . . .

net employment in the EU15 has risen by 6.5 million since 2000 . . . more are needed. One in 12 Europeans is out of a job, a sorry statistic that is only now showing signs of improvement after three long years.

But it is important to avoid generalisations about joblessness. Half of the EU15 economies have enjoyed effective full employment this decade. The problem is centred on the big three (France, Germany and Italy) where most of those out of work live. In these countries, the conventional wisdom that they need more radical labour market reform is right on the money.

Europe has other problems, too. Since the mid-1990s, the rate of labour productivity growth has slowed; many countries national "innovation systems" are not firing on all cylinders; and, given the likely economic effects of population ageing from 2010, politically painful pension reform is too slow.

Uneven economic performance is yet another worry, particularly when almost everyone shares a currency. The problem is most acute in the south.

Italy and Portugal are seeing little increase in prosperity, however pleasant holidays there might feel. In stark contrast, the two other Club Med countries, Greece and Spain, look close to blowing a gasket. This poses a threat to the euro that should not be underestimated.

But on other stability fundamentals, the EU is boringly dependable. Its balance of payments with the rest of the world is, well, balanced, and its currency strong. Inflation is under control and Europe's central bankers are not averse to interrupting their summer breaks to keep it that way by hiking interest rates.

On reflection, much of the current derision about Europe . . . and extolling of US strengths . . . echoes comment in the 1980s about different economic models.

Japan was the future then, and the American model written off. This superficial assessment ignored Japan's weaknesses and exaggerated its strengths.

The opposite mistake was made with regard to the US.

While Europe has its problems, the fundamentals are mostly good. Some issues need more urgent attention, but there is little complacency and reforms are generally moving in the right direction. Europeans will go on enjoying their dolce vita. That's something we can all toast as we head off on holidays.

Dan O'Brien is a senior editor at the Economist Intelligence Unit