“Bastard Americans ruin your life,” was how The Daily Mash, London’s answer to The Onion, reported the worsening financial turmoil, reflecting a European propensity to blame America that goes much higher than satirists. Indeed, some of Europe’s leaders have been positively reveling in the prospect that the Great Crash of 2008 might mean the end of Anglo-Saxon free-market capitalism as we’ve known it. France’s President Sarkozy, recent darling of the Washington belt-way crowd, has opined that “the idea of an all-powerful market without any rules or any political intervention is mad…self-regulation is finished. Laissez-faire is finished. The all-powerful market which is always right is finished.” Germany’s finance minister, Peer Steinbruck, piled in behind him with appropriate schadenfreude to declare that “the origin and the center of gravity of the problem is clearly in the US,” adding that the German banking system was much more “robust” and better-regulated than the one across the Atlantic. Naturally, Russian premier Vladimir Putin couldn’t resist joining the “Bash America” crowd. “Everything happening now in the economic and financial sphere began in the US…the irresponsibility of the system that claims leadership.”
As Europe’s recession takes its malign grip, blaming “bastard Americans” will no longer suffice. Europe’s voters are more likely to seek revenge on their own leaders, with a universal cry: “Throw the bastards out!”’
That was then — i.e. a few days ago. This is now — and suddenly the cacophony of European critics has gone quiet as Europe’s financial system finds itself in its own crisis. As I write, Iceland has suspended trading in financial stocks in Reykjavik because of its banking crisis, the Germans are trying to explain why they’ve guaranteed all private bank deposits after attacking the Irish for doing the same, the British are thinking of bolstering their banks’ balance sheets with taxpayers’ money (taking a government share of the equity in return, as the Swedes did in Stockholm’s banking crisis of the early 1990s) and everybody is wondering what will be the next European bank to go belly up. (At the last count, five have had to be bailed out in as many days, and there wasn’t an American in sight to blame). Sure, the origins of the current crisis can be traced to the US sub-prime market, but it’s now clear that Wall Street wasn’t the only one with its snout in the trough. Iceland’s banks — whose exposure dwarfs that little country’s national wealth — went on a lending spree that makes Lehman look positively responsible. Germany’s Hypo Bank, a massive lender to the local property market, loved sub-prime just as much Fannie Mae or Freddie Mac — as did Britain’s Northern Rock and Bradford & Bingley, once respectable building societies (savings & loan) who behaved like reckless Wall Street hotshots and had to be nationalized to save them. And if you think the Bush Administration or US Congress has not exactly covered itself in glory in its responses to the financial crisis, you should look at the European Union. The leaders of the EU’s biggest economies gathered in Paris and decided with grim determination to do — well, not very much at all, except to aver how determined they were. (Frankly, it was a waste of carbon footprints). Led by German Chancellor Angela Merkel, they then beat up on the Irish for guaranteeing all Irish bank deposits. Ms. Merkel then went home and did the same for German banks. That’s what passes for European unity in a crisis. European voters are fast coming to the conclusion that, despite America’s undoubted seminal role in the worst financial crisis for 80 years, their own leaders are not up to the job of responding and their own banks are as guilty as Wall Street. They’re also preparing for a serious economic slowdown. France is already in recession, Italy even more so. Germany will soon follow. Here in Britain, Prime Minister Gordon Brown keeps claiming that the British economy is better placed than any other to survive the meltdown. The opposite might be the truth, for three reasons: financial services matter a lot more to Britain than any other major economy since London became a massive branch of Wall Street and financial services are about to get a crew cut; British house prices are plummeting faster than a Florida condo, which will decimate consumer spending; and per capita household debt is even higher than it is in America (now there’s a record of profligacy to be proud of), which means people will be pushed to service their debts in a downturn. So Britain, too, is heading for a recession which could be long and deep.
As Europe’s recession takes its malign grip, blaming “bastard Americans” will no longer suffice. Europe’s voters are more likely to seek revenge on their own leaders, with a universal cry against all incumbent governments of “Throw the bastards out!” The Republicans are not the only ones about to feel the wrath of the people for allowing absurd financial extravagance and waste on their watch.