I don't think there's anything that prevents Europe from imposing sanctions on Iran. I know that is a matter of continued debate and discussion within European circles. President Sarkozy and Prime Minister Brown have both indicated that sanctions may well be necessary against Iran, and have at times tried to convince their European partners to move ahead on sanctions.
There was a time in the last administration when it appeared European sanctions would actually be put in place. That was the time when the CIA report came out and was misunderstood internationally as saying that Iran was not in fact pursuing a nuclear weapons capability. That undercut, at that moment, the political will on the part of many European leaders to move ahead. In fact, Europe's difficulty with sanctions is that they are also suffering from an economic recession and that sanctions always entail not only an effect on the recipient state but a foreclosing of business on the part of the European states. Some countries that are major partners with Iran in trade, such as Germany, Italy, and Austria, have been reluctant to force their own businesses to cut those relationships.