France’s Nicolas Sarkozy, left, and Britain’s Gordon Brown are credited with devising the response to the international economic crisis.

NELSON D. SCHWARTZ ECONOMIC ANALYSIS
PARIS

IS EUROPE NO longer an economic museum?
In recent years, as Wall Street boomed, Americans often dismissed Europe as a place for languorous meals and luxurious vacations, not economic innovation.
London remained a financial hub, of course, but it was often treated dismissively - as a flashy aberration pumped up by petrodollars from Russia and the Gulf, an exception to the otherwise somnolent Continent.
That kind of thinking is now being challenged, because recently Europeans have proved more nimble than Americans at getting to the root of the global financial crisis, whatever they may have lacked as innovators.
After initially dithering, Europe’s leaders came up with a financial bailout plan that has now set the pace for Washington, not the other way around, as had been customary for decades.
That was clear when the United States Treasury Department decided to depart from its own initial bailout plan - the one approved by Congress earlier this month - and invest up to $250 billion directly in America’s banks. The details of that approach had been laid out days earlier by European leaders as they tried to save their own financial system.
And that outcome left Gordon Brown, the British prime minister, and Nicolas Sarkozy, the French president, in something of a commanding position to claim the title of wise men. They are now speaking of creating a Bretton Woods agreement for the 21st century, while the leaders of the country that worked out at Bretton Woods, New Hampshire, prefer to stay away from such big talk.
Mr. Sarkozy told European leaders who gathered in Paris that he hoped “literally to rebuild the foundations of the financial systems.”
C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington, a centrist policy center, summed up the week this way: “When it came to crisis-response mode, the Europeans, especially the British, did take the lead and the U.
S. changed course.”
As a result, the markets seemed to respond well, with European shares the big winners. Credit markets also showed some positive signs, and the Federal Reserve broadened its response even further, saying October 21 that it would provide financing to shore up money market mutual funds.
“European capitalism is better suited to meet the challenges of the current financial crisis,” Trouw, a Dutch newspaper, declared recently.
Not everyone was quite so triumphalist in tone, or so confident of generalizing from this one moment.
While the course of action that emerged in recent days was smart, it doesn’t make up for a long period of denial about Europe’s own problems with credit practices before leaders finally recognized that the global financial system was collapsing, said Jean Pisani-Ferry, a former top financial adviser to the French government who is now director of Bruegel, a research center in Brussels. “For too long, they said the crisis was in the U.S. and wouldn’t affect them,” he added.
And the fact that France and Germany, Switzerland, Spain and Britain are together anteing up more than $1 trillion to rescue their own financial institutions challenges any assertions that European bankers were more prudent than their American counterparts.
But whether it was a one-time exception or the first sign of a new pattern, Richard Portes of the Center for Economic Policy Research in London sees a fundamental strength in the European strategy. While Washington focused on buying up hundreds of billions in mortgage loans gone bad, leaders like Mr. Brown sought to fix a deeper threat: a lack of faith in the banks. That was why their tactic - becoming the investor of last resort, and the guarantor of loans between banks - worked to stanch the panic that had caused Wall Street to plunge roughly 20 percent in one week.
“The American officials and Congress got so tied up” with the bad mortgage debt, Mr. Portes said, that “they didn’t see that the key was recapitalizing banks, and re-establishing liquidity in money markets. The Brits and the Europeans saw this first.”
Andrew Moravcsik, a professor of politics and international affairs at Princeton University in New Jersey, suggests that the experience of following Europe’s example, for once, could have domestic political implications for the United States.
“Americans, especially conservatives, have a particular view of Europe as overregulated, therefore suffering from weak growth and Euro-sclerosis,” he said. “This could change that view, and create more respect for the European view of regulation more generally.”
It also, he said, might encourage American s to take a second look at what used to be called the “third way” - seeking a path that shrinks from dogmatically liberal or conservative views in favor of something pragmatic in the middle.
For the moment, Europe is in sync with the United States, but that may not last, says Mario Monti, the former antitrust chief at the European Commission . “A crisis like this can either bring disintegration or further integration,” he said.