The Italian health department said Jan. 13 that a cow at McDonald's' Italian beef supplier was suspected of having Mad Cow disease. (Tests confirming the suspicion have not yet been administered.) Hours later, Oak Park, Ill.-based McDonald's (NYSE: MCD - news) declared that none of its hamburger patties come from the meat-processing plant where the cow in question was collared.

Nevertheless, Cremonini, the Italian meat giant that owns the plant, is in fact the exclusive meat supplier for the nearly 300 McDonald's restaurants in Italy.

No matter how convincingly McDonald's is exonerated from carrying contaminated meat, the mere association with this news is a public-relations catastrophe for the chain.

Europeans are terrified of Mad Cow disease, which first spread from cows to humans in England in the late 1980s. The disease has since killed 80 people, mostly in the U.K.

The European Union banned beef imports from Great Britain in 1996 and millions of English cows were incinerated. Since then, continental Europeans have eaten their beef relatively worry-free--until this fall, when dozens of infected cows were found in several countries, including France and Germany.

That news prompted the European Union to order mandatory testing of cattle more than 30 months old. If the Cremonini cow does test positive, it will be the first Italian cow diagnosed with the disease.

As meat sales throughout Europe plummeted this winter, McDonald's tried to pre-empt concerns by running television and newspaper ads reassuring Europeans about the safety of its hamburgers.

That's not surprising, since Europe is crucial to McDonald's' bottom line. The more than 5,200 European restaurants accounted for 23% of its sales in the first three quarters of 2000. Although business has actually grown by 11% in Europe, the euro has kept European revenue flat, according to the company's most recent report.

Today McDonald's execs probably wish the weak euro was the worst thing they had to worry about.  
 
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