European Union: It’s every country for itself

Economic catastrophe has struck Europe, said Philippe Gumy in Switzerland’s Le Temps. All the stock exchanges are plummeting: On this week’s “Black Monday,” the Swiss exchange lost more than 6 percent of its value, the German more than 7 percent, and the French 9 percent, plunging to its lowest level in history. Bank after bank is failing in a domino effect across the continent. We are paying for our earlier complacency. Less than two weeks ago, German Finance Minister Peer Steinbrück was gloating that the U.S. had gotten its comeuppance. Now, he bleakly admits that, “We are all staring into the abyss.” If Europe had acted sooner, this epidemic of “panic” might have been avoided. “It’s like a fire,” said French fund manager Emmanuel Soupre. “It’s much easier to put out in the first five minutes than after the flames pick up.” Yet Europeans still cannot act. A “mini-summit” last weekend of Europe’s four biggest economies—Britain, France, Germany, and Italy—produced no joint plan.

Germany and Britain opposed joint action, and “for good reason,” said Holger Appel in Germany’s Frankfurter Allgemeine Zeitung. A “case by case examination” of which banks to save is preferable to the “blanket guarantee” for all European banks that French President Nicolas Sarkozy was pushing. Some deserve to be saved; some don’t. Unfortunately, just hours after the summit ended, one of Germany’s biggest lenders, Hypo Real Estate, failed. To avoid a general panic, German Chancellor Angela Merkel announced that the government would guarantee all German savings. What a mistake. Just look at what happened when Britain guaranteed its Northern Rock bank: Brits “went wild pouring their money” into it until the bank became so bloated it overstepped its legal holdings limit. Meanwhile, billions have been flowing into Ireland since that government announced last week that it would guarantee all holdings.

That’s precisely why we need a Europe-wide strategy, said Spain’s El Pais in an editorial. The spastic lurching of capital from one bank to another, chasing safety, “is a perverse procedure that increases the likelihood of economic depression in Europe.” Every country for itself is not working. A larger summit of all the affected players is needed so we can work out how to regulate our common market.

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But this crisis shows that Europe doesn’t have a single economy, said Janet Daley in Britain’s Daily Telegraph. France and Germany don’t have the kind of “property-owning traditions” that produce housing booms and busts in Britain and Ireland. And the British people have much greater personal debt than, say, Italians. “We are very different nations with very different economic habits and there will never be a one-size-fits-all solution to our economic problems.”

Even so, said economists Christian de Boissieu and Jean-Hervé Lorenzi in France’s Le Monde, the world must have stable financial institutions that all countries can depend on. The World Bank and the International Monetary Fund, two global banks set up at the Bretton Woods, N.H., conference at the end of World War II, are no longer enough. We have moved “from a world run by the Western powers to a new one, in which 50 percent of the wealth is produced elsewhere.” It’s time for a new regime to replace Bretton Woods and “reshape the global financial system.” We can’t wait for the U.S., mired in its own disaster, to propose a solution. “Europe must take the lead.”