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The European economy affected the development of socialism because it was the process of industrialization that gave rise to the theory of socialism in the first place.
As Europe industrialized, workers came to have less and less control over their lives. They had to work when they were told to work. They had to work at the pace and in the ways that their bosses told them to. This took away from the sense of independence that many of them would have had in previous times when they were working for themselves.
At the same time, industrialization made the workers worth less. Instead of being, for example, a master craftsman making shoes by hand, a person might simply be running a machine that cut the shoes out. This took much less skill and was therefore paid much less. Most of the money would have gone to the factory owner.
This was the environment in which Marx developed the idea of socialism. He argued that capitalism was robbing workers of the fruits of their labor and giving it to the capitalists. He said that industrialization was "alienating" them, by making them lose control of their lives. For that reason, he argued, workers should overthrow the capitalists and take control of their lives back again.
In this way, the industrialization of the European economy helped lead to the development of socialism.
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