"It's like that wave approaching the shoreline that you see in the distance and don't think is big, and then it's 100 feet in front of you and you realize it is."

That's how London-based economist Mark Chandler described Europe's perspective on the potential 'latest wave' of the housing crisis -- the research report by Lehman Brothers (NYSE: LEH) that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) may have to raise up to $46 billion and $29 billion in additional capital, Bloomberg News reported.

Europe is concerned that the pair's announcement "signals another round of write-downs here in England and Europe as well as in America" Chandler told BloggingStocks Tuesday, with negative consequences for the stock market, and, equally significant, for business and consumer confidence, he said.

Europe's major stock markets decline

Indeed, Europe's major stock markets did not react favorably Tuesday to the Lehman report. London's FTSE fell 66.70 points to 5446.00, Germany's DAX declined 104.49.35 to 6,291.71, and France's CAC 40 fell 78.22 to 4,263.37 in Tuesday afternoon trading.

Banks worldwide have already written-down about $400 billion in debt and related instruments due to the end of the housing boom, and an accompanying surge in mortgage defaults and related asset defaults.

Chandler said Europe is not concerned that the markets will see a repeat of the contagion and lack of confidence in debt that froze credit markets August 2007, but that the write-downs "will be another `contractionary' force on economies that can ill afford it."

"The concern now is not so much one of liquidity as it is of recession," Chandler said. "Growth, while muddling along here in the U.K. and on the [European] continent, is slowing and there's a sense now that another round of housing-related write downs will sap confidence enough to trigger a recession."