In Financial Crisis, Europe Leads the Way (for a Change)

Investment in banks proved better strategy than mortgage bailout
By Matt Cantor,  Newser User
Posted Oct 19, 2008 8:08 AM CDT
European Central. Bank Pres. Jean-Claude Trichet, UK PM Brown, EC President Jose Manuel Barroso, France's Pres.Sarkozy and Pres. of Eurogroup Jean-Claude Juncker, from left, meet Oct. 12.   (AP Photo/Philippe Wojazer, Pool)
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(Newser) – The US has long considered Europe to be the economic equivalent of a doddering old uncle, but this week it was oldster leading whippersnapper America by the hand through the most serious crisis since the Depression. Europe, seeing the need for a sturdier fix than the mortgage-bailout Band-aid Washington proposed, led the charge by investing in its own banks, a move the US followed only after much hand-wringing. But it remains to be seen whether the trend will continue, the New York Times reports.

“Europe showed the capacity to respond to a crisis more quickly than the US,” which “went through agonies to come up with a plan,” said a former European Commission official. The effects were shown in the markets: Europe’s stock exchanges bounced 8.2% this week, while the US saw a more modest 4.5% boost. The key to Europe’s success was its focus on the problem’s roots: not mortgages, but faith in banks.