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The Europeans watched bemusedly while the storms swept through the U.S. financial markets and the supposedly laissez faire Bush administration pleaded with Congress for a $700 billion government intervention in the marketplace.
The Europeans, Italian Prime Minister Silvio Belusconi among them, blamed the U.S. troubles on our embrace of "speculative capitalism, the implication being that the more tightly regulated European economies were immune from the storm. And if it did hit Europe, Britism Prime Minister Gordon Brown suggested it would be all our fault, the disease would have "come from America."
And then it hit — there and in Asia.
Within a few days, Germany bailed out a large real estate lender, the Benelux countries arranged the takeover of a large banking and insurance company, Great Britain nationalized a large mortgage lender, Iceland bailed out one of its big banks and a large Italian bank was said to be tottering. And the underlying problems were largely home grown. The European markets tanked worse than ours. And, oh yes, the dollar surged against the euro.
Misery may love company but we really need the European markets to stabilize. It does us no good if as a result of financial panic they halt investment in the United States.
The problem is that the Europeans are perhaps less well equipped than the United States to right the situation. While there are 15 nations in the euro zone, the common currency hasn’t translated into uniform financial regulation and European financial firms still operate under a patchwork of rules. There is a European Central Bank but it isn’t as powerful as our Federal Reserve and each country retains its own central bank.
The disunity was apparent over the weekend when Germany announced that it would guarantee all private savings accounts no matter how large and Ireland announced that it would guarantee the deposits and liabilities of its sixth largest banks. Other nations cried foul as deposits out of their banks and into presumably safer German and Irish accounts.
The Europeans may find our way of doing business a little too raw and undisciplined but they may come to envy the size and speed of the response by the Treasury and Congress.