Europeans have proved more nimble than Americans at getting to the root of the global financial crisis.
After initially dithering, Europe’s leaders came up with a financial bailout plan that has now set the pace for Washington, not the other way around, as had been customary for decades.
That was clear when the Treasury Department decided to depart from its own initial bailout plan — the one approved by Congress earlier this month — and invest up to $250 billion directly in the nation’s banks. The nuts and bolts of that approach had been laid out days earlier by European leaders as they tried to save their own financial system.
C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington, a centrist economic policy center, summed up the week this way: “When it came to crisis-response mode, the Europeans, especially the British, did take the lead and the U.S. changed course.”
And the markets seemed to respond accordingly. When stock exchanges around the world bounced back last week from the rout earlier in the month, European shares were big winners. They ended the week up 8.2 percent, compared with a 4.5 percent gain for Wall Street. Many Europeans can’t resist crowing. “European capitalism is better suited to meet the challenges of the current financial crisis,” Trouw, a Dutch newspaper, declared recently.
In London, where Britain’s willingness to follow the United States into Iraq five years ago still evokes outrage, officials have been especially quick to point out they didn’t follow Washington’s lead this time.
“There’s no doubt that it was a British plan that was copied by the U.S.,” said Leon Brittan, who served as Home Secretary under Margaret Thatcher and was a top official at the European Commission. “It shows that the American conception of Europe as an economic basket case is outmoded and wrong.”
“Europe showed the capacity to respond to a crisis more quickly than the U.S.,” he added. “The U.S. went through agonies to come up with a plan.”
Not everyone was quite so triumphalist in tone, or so confident of generalizing from this one moment. While the course of action that emerged in recent days was smart, it doesn’t make up for a long period of denial about Europe’s own problems with credit practices before leaders finally recognized that the global financial system was collapsing, said Jean Pisani-Ferry, a former top financial adviser to the French government who is now director of Bruegel, a research center in Brussels. “For too long, they said the crisis was in the U.S. and wouldn’t affect them,” Mr. Pisani-Ferry added.
Europe, in fact, still has plenty of problems, notably high unemployment and the likelihood of a prolonged recession, as Britain, Ireland, Spain and other countries suffer through a housing bust of their own.
And the fact that France and Germany, Switzerland, Spain and Britain are together anteing up more than $1 trillion to rescue their own financial institutions challenges any assertions that European bankers were any smarter or more prudent than their American counterparts.
