Viewed from the capitals of continental Europe, the financial market mayhem of the past week was an accident begging to happen ever since the United States and Britain rejected calls for stronger regulation. Now, as Washington resorts to unprecedented levels of state intervention to salvage an industry from its worst crisis since the Great Depression, the message from “Old Europe” is that the Anglo-American doctrine of freewheeling, self-regulating markets has passed its sell-by date. German Chancellor Angela Merkel, whose country tried in vain to win U.S. and British backing for greater market supervision at international level last year, believes a change of heart is already taking place. “For a long time the saying went, ‘Let the markets take care of themselves'. Today we have moved on because even America and Britain are now saying, ‘Yes, we need more transparency',” the centre-right leader said on a visit to Austria on Saturday. French President Nicolas Sarkozy, due to meet New York Federal Reserve chief Timothy Geithner during a U.S. trip on Monday, is expected to speak out on the issue. Several members of his government have already weighed in. “What's clear is the capitalist system was inherently flawed and those involved didn't fix it early enough,” French European Affairs Minister Jean-Pierre Jouyet, former head of the French Treasury, said in an article in Le Monde newspaper. “The international financial crisis caused by the disorders in American financial markets will slow and is already slowing the economy of the entire planet,” Economy Minister Christine Lagarde told French Europe 1 radio on Saturday. “Financial delinquents”? Right now, the focus is on saving the house rather than rewiring it from top to bottom though. U.S. authorities scrambled at the weekend to assemble a rescue plan in which the “toxic assets” behind the chaos -- mostly mortgage-linked derivatives -- will be bought out of private sector hands at a cost of up to $700 billion. That takes to $1.7 trillion the total amount of public money committed to fighting a crisis that started with the collapse of the U.S. housing and sub-prime mortgage markets over a year ago. In the last couple of weeks, markets lost confidence and the US authorities in essence nationalised several huge firms such as mortgage lenders Fannie Mae and Freddie Mac, and insurer AIG. If and when the U.S. plan stabilises the situation, the hope in capitals of mainland Europe's major economies is for a fresh look at ethics and safety controls in a bid to prevent more of what Jouyet said was “verging on financial delinquency”. “There is no doubt that the financial system will now change in a profound way, and I do believe that this process will start with a back-to-basics approach,” said Marco Annunziata, chief economist at UniCredit, a large European bank. “The current crisis leaves no doubt that something went horribly wrong in the past few years, in a way and scope that has posed a grave threat not just to the financial system, but to the world economy and therefore the well-being of ordinary people in a number of countries,” he added. Anglo-Saxon ‘mistakes' For Adrian Blundell-Wignall, a financial markets expert who quit Citigroup for the public service at the OECD, that means drawing a clear line between investment banks and commercial banks, with the latter ring-fenced to ensure their primary role -- financing business development and households. Any such review could face resistance from Britain and the United States, which will want to ensure their financial centres remain the world's largest despite the recent carnage. And for some in continental Europe, there is some bad blood mixed in with the conviction that change is essential. “We're part of the stabilising forces in this crazy development going on around us,” Germany Deputy Economy Minister Hartmut Schaurte said last week. “We didn't make Anglo-Saxon mistakes. We didn't bet everything on financial services.” Former Federal Reserve chief Alan Greenspan, widely admired for his helmsmanship in the years before the US housing bubble burst, has already come in for searing criticism from Italian Economy Minister Giulio Tremonti.“The mastery turned out to be madness,” he told Corriere della Sera daily in an interview published last Thursday. “Alan Greenspan was considered a master. Now it should be asked whether, after Bin Laden, is it not he who has done the most harm to America.” – Reuters __
