After an initial flurry of shadenfreude, it seems to have dawned on Europeans over the past week that they are, if anything, in an worse situation than the United States is. In part, this is because it seems that their banking and financial sector is, contrary to stereotype, actually less regulated than ours. And in part this is because Europe has constructed an economy that’s pretty highly integrated but doesn’t have a central EU institution with the capacity to deal with a problem of this scope. The European Central Bank lacks the authority, and there’s no European Central Finance Ministry to turn to. Now, though, Finance Ministers are meeting in Luxembourg to try to find a common approach.
On the other hand, just because Europe needs a common approach to the problem doesn’t mean they’ll actually get one. The EU decision-making procedures are pretty dysfunctional so things could go badly wrong. But it’d be hard for a bunch of different countries to maintain a currency union in the midst of a banking crisis if the countries are taking wildly different approaches and having dramatically different levels of success. Thus, the crisis would seem likely to either prove to be the impetus for further integration or else the impetus for disintegration of the existing supranational bloc.