Why PS3 games sales is doing much better in Europe.?

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There isn't a single reason you can pick, but there are few big reasons why PS3 does so good in Europe.

1. Brand recognition. These are the people who got PSX ten years ago. PSX had few hit games, which sold the system along it's "massive" amount of shovelware. Marketing for PSX and it's hit games was really massive, everyone knew what "the 3rd place" was. And games like Gran Turismo, which offered something that wasn't seen before (a lot of licenses, high variety of cars in different classes which you could tune up and race against more powerful cars) and the "super-casual" Tekken, did appeal to non-gamers. Actually, if you notice, PSX expanded market (only) in Europe by 30M.
Now these people buy PS3, since Playstation is the "only" gaming system they know of. Especially since "Playstation" has become synonyme for gaming, just like "Nintendo" became ten years earlier.
People also are used to seeing some certain series as PS exclusives, considering them equal to 1ts party games, and they assume that these games will be exclusives to PS in the future. Or multiplatform games are seen as exclusives, since the previous Playstations have been so popular, that the version with highest profile have been the PS version. And "everybody knows that all the games will be on Playstation".

2. This propably would have fit in the "1.", but there's a lot of retailers that basically sell only Playstation -branded consoles (this has a lot to do with "1."), they either have small shelf space for other consoles (although 360 has got pretty good space), or just don't sell others (the supermarkets etc.). And this takes a lot of time to change.

3. The poor former eastern block countries, which economy have been rising, where people see everything expensive as luxury items, with what you show to people how much you can afford and are seen as something that bring luxus to your life. It's not that the people would be jerks, it's just the culture, caused by poverty, with rising economy, people are starting to afford everything expensive.

4. Localisation. Sony uses a shitload of money to localise their games, thing that EA has been doing years with their popular franchises, Sony even dubs their games to different languages (this propably is seen a good thing in countries like Germany, where they are used to see movies and TV-series dubbed, when the smaller countries are used to subtitles). But, they localise all their games to different languages.

5. Less competition from M$. Although 360 has got somekind of foothold from certain markets (mainly UK and Scandinavia), it's games are mostly the kind of games that sell in the NA, but not Europe and since most of the games are ported to PC, it doesn't exactly boost 360 sales. M$ is also seen as "the devil itself" in Europe. Can't blame the people, i have used Windows. And it's issues with EU fining them doesn't help either. A lot people are also pissed to M$ about the Vista prices (they have to somehow get the money for their fines).

So, when looking at things, you shouldn't ask why is it doing so badly outside Europe, you should ask why does PS3 do so good in Europe.