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In Europe, Excesses Blamed For Money Meltdown

MICHELE NORRIS, host:

From NPR News, this is All Things Considered. I'm Michele Norris.

MELISSA BLOCK, host:

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And I'm Melissa Block. Financial institutions are in turmoil in the U.S. and Britain, but banks in continental Europe appear to be in better shape. Many Europeans feel reassured by tighter regulations there. As NPR's Sylvia Poggioli reports from Brussels, Europeans are pointing fingers at more freewheeling markets than their own.

SYLVIA POGGIOLI: It's a busy afternoon in the de facto capital of Europe. But on the street the mood is relaxed. Vincent Jensen(ph) is a copywriter from the Netherlands.

Mr. VINCENT JENSEN (Dutch Copywriter): I haven't really seen anything in my personal life that should make me feel afraid for my financial situation yet.

POGGIOLI: Here in Europe, financial experts stress the fundamental differences between the way the American and European economies work. Heirt Noelt(ph) is a Belgian asset manager.

Mr. HEIRT NOELT (Belgian Asset Manager): Exports have been the main engine of growth in Europe, where as consumption and credit growth have been the main engine of economic growth in the United States.

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POGGIOLI: The mood is relaxed even at Business Europe, the European employers' association. Officials are confident that no continental European bank is in danger of collapse. They point out that Europeans are much bigger savers than Americans are, and most banks have deposits rather than manage investments. Communications director Philippe de Buck says Europe has self-defense mechanisms.

Mr. PHILIPPE DE BUCK (Communications Director, Business Europe): We are much more risk averse. We don't have companies as Freddie Mac or Fannie Mae who cover half of the housing mortgages all over the United States. And so, that is much more spread in Europe, perhaps much more balanced. I dare to say, perhaps better managed.

POGGIOLI: After decades of American criticism of European state interventionism, The Economist magazine quipped that the Fed and the Treasury are nationalizing the U.S. economy faster than you can say Hugo Chavez. But there's also concern. European governments are calling for better coordination and tighter regulation, as had been proposed by Germany, but was rejected by the U.S. and the U.K. at the G8 meeting last year. Former Belgian Prime Minister Mark Eyskens says what's needed is something similar to the 1944 Bretton Woods Conference that created rules and institutions to rebuild the economic system after World War II.

Former Prime Minister MARK EYSKENS (Belgium): Organizing a worldwide control mechanism, solidarity, transparence, and responsibility. And I think we should do it as worldwide as possible. We cannot longer stick only to the United States and Europe.

POGGIOLI: In the meantime, the European Union intends to strengthen its own defenses. It will speed up legislation for mandatory supervisors for big cross-border banks and will monitor rating agencies, which will have to register and become subject to supervision. But the immediate concern, former Prime Minister Eyskens says, is that new credit restrictions could harm manufacturing companies at a time when European growth is stagnant.

Mr. EYSKENS: And if the financial crisis were to be transformed into an economic crisis and contaminate what we call the real economy, then of course the consequences for Europe would also be extremely grave.

POGGIOLI: But in the midst of the global financial turmoil, the European Central Bank continues to focus on the fight against inflation which has reemerged for the first time in nearly two decades. Rejecting pressure from the U.S. Fed to cut interest rates, one ECB official said there is too much money in circulation, another sign that Europe is seeking its own way out of what it sees as a crisis born in the U.S.A. Sylvia Poggioli, NPR News, Brussels. Transcript provided by NPR, Copyright NPR.

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