by Janet Albrechtsen

HERE'S a prediction from an Australian temporarily in Paris. European schadenfreude about the global financial crisis may turn out to be a case of premature European crowing. But for the moment, let the Europeans pander to their innate need to excoriate the evils of American capitalism. French President Nicolas Sarkozy has been leading the way with the finger pointing, kicking American capitalism and calling for an end to the hateful practices of the past. Super Sarko has demanded that the upcoming economic summit to be hosted by US President George W. Bush be held in New York because that's where everything started.

Newspaper headlines cheer that, suddenly, Europe looks pretty smart. Dutch newspaper Trouw announces that European capitalism is better suited to meet the challenges of the present financial crisis. German weekly Der Spiegel features the Statue of Liberty with an extinguished torch as the price of arrogance. German Chancellor Angela Merkel and her Finance Minister Peer Steinbruck tell us that the financial crisis is an American affliction. London's The Daily Telegraph talks about emboldened Europeans eager to ambush Bush to impose a European vision for new financial market regulation.

In the present climate, it's tempting to fall for European talk of this being some kind of American virus. And it's equally tempting to be seduced by European solutions of long-term government intervention. But in both cases, European triumphalism is unfettered by facts.

As far as the blame game goes, there is a distinctly European strain to the financial crisis.

Take Germany. You can't blame the Yanks for the fact that German banks had their snouts in the sub-prime trough and are now paying the same price as US banks. It turns out that German banks were just as complacent about risk.

Bayerische Landesbank, a state-owned regional bank, has put out its hand for a E5.4 billion ($11 billion) bailout from the German Government after writing down E2.6 billion in investments during the first half of this year, much of that related to sub-prime mortgages.

Indeed, the most recent data from the Bank for International Settlements should wipe the smirk from many European faces. Western European banks lent three-quarters of a total $US4.7 trillion ($7.5trillion) to emerging markets in eastern Europe, Latin America and Asia: a bursting bubble that surpasses the US sub-prime mess. Again, in Germany alone, financial institutions lent $US21.3 billion to Icelandic banks now collapsing, accounting for more than a quarter of all foreign lending to Iceland and more than five times the level of British lending, Iceland's next biggest creditor country.

As much as Merkel would like to blame greedy, unregulated Americans for the failure of German banks, Germany's economic newspaper Handelsblatt speared European self-righteousness by listing eight German myths about the financial tsunami. Editor Bernd Ziesemer pointed out that the German Government's bank bailout is almost the same size as the US package. The truth is the most awful weapons of mass financial destruction came from London and Frankfurt. Aggressive German financiers were busily inventing and packaging up derivatives that Europeans would prefer to frame as a curse of American capitalism.

Just as deceptive are the solutions coming out of Europe this past week. Clearly, European opponents of free markets are excited. For them, the crisis and Washington's bailout of US banks and businesses are evidence that American capitalism is dead. The president of the European Commission, Jose Manuel Barroso, says Europe should lead the way because we need a new global financial order.

Lapping up the limelight, Sarkozy described the crisis as a great opportunity as he touted his idea for Europeans to form their own sovereign wealth fund to defend domestic companies from marauding foreigners. It's just the latest, most barefaced attempt to use the turmoil as an excuse to restore European statism as official policy.

"I don't want European citizens to wake up in several months and find European companies belonging to non-European capital which bought (them) at the share price's lowest point," he told the European Parliament a week ago. Under Europe's new world order as laid down by Sarkozy, the spirit of fraternite (let alone liberte and egalite) does not extend to foreigners.

Far from this being a new world order, it is more a case of old-fashioned anti-capitalist and anti-foreigner sentiment. And as The Wall Street Journal Europe reported on Monday, senior Chinese officials appear to have allied China with Europe's call for more regulation. It's worth raising an eyebrow when communists line up with Europe.

Fortunately, the Germans performed a mercy killing on Sarkozy's exceptionally dumb plan quicker than you can say governments are bad at picking winners.

As Sarkozy and other old-fashioned interventionists look to exploit the growing anti-capitalist mood, it pays to remember that the lessons of the financial crisis concern the quality of regulation, not its weight. Heavily regulated German banks appear to have made as many, and as bad, sub-prime lending decisions as the lightly regulated American banks. And though the Australian financial sector has been progressively deregulated since Paul Keating started the process, it has produced a shining beacon of financial prudence and rectitude.

Finally, a little history before Europeans start dancing a jig on the grave of US capitalism. America has been written off before, often after some disastrous bursting of an economic bubble. But the genius of US capitalism - the creativity behind its destructive tendencies - is its flexibility and speed of recovery.

Recall Mitsubishi's purchase of the Rockefeller Center in New York in the late 1980s? Back then it seemed the Japanese economic model - driven by rigid, organised and centralised forces - would vanquish American capitalism.

But when times got tough, Japan lacked the creativity and flexibility to deal with an economic downturn as speedily and as successfully as the US. While the Americans lifted themselves up off the mat and ran headlong into the tech boom - and the next round of growth and, yes, greed - the Japanese suffered the lost decade in the '90s.

Before we embrace European solutions as our saviour, remember that in the past decade, Europe has had the distinction of stagnant job growth: unemployment in France and Germany has not fallen below 7 per cent. With European governments addicted to regulation and with work practices mired in rigid inflexibility, it could be that the US will recover much more quickly from a recession that many European countries. In that vein, beware of sniggering Europeans peddling myths about the demise of American capitalism and the need for a new inspiring European solution. The triumphalism behind talk of a new grand European model of economics may turn out to be short-lived.