Lehman II

The Europeans may find the admonitions of the U.S. overbearing, but they amount to a serious warning sign.

Only a few weeks ago, anyone who compared the economic downturn and market turbulence in the fall of 2011 with the world economic crisis in the fall of 2008, following the bankruptcy of the U.S. investment bank Lehman Brothers, was considered to be an alarmist. In the meantime, parallels have started to show. A hint of Lehman II hung over the economic summit in Washington. Ever-present was the concern about the next slump in the world economy, which could entail yet worse consequences because the air has gone out of the erstwhile rescuers, the government and central banks. The collective effort of stimulus packages and bank bailouts from Alaska to Tierra del Fuego will not repeat itself.

In any case, the Chinese and Indians certainly won’t rescue the euro. There would have been success already if the states did not work against one another, thus avoiding competitive devaluations, and kept their markets open. At the G-20 meeting mutual admonitions hailed down. The Europeans, however, were under the most pressure. The Germans, especially, may have found the instruction from the U.S. treasury secretary overbearing. After all, the U.S. is, in many regards and particularly with debt, much worse off than the eurozone. Yet the admonitions are not only ludicrous, they signal a serious warning. Do Berlin, Paris and Brussels really need tutoring to comprehend that they must extinguish the fire if their house is burning? The rest of the world could hardly utter a sharper expression of mistrust.