"Czech Prime Minister Topolanek, who currently heads the EU presidency"

That was a great quote, Joerg, but you failed to mention the punch line. That is the fact that the government PM Topolanek heads just lost a vote of confidence in the Czech parliament. So how are those economic recovery plans working out in the Czech Republic, Mirek?

Do you suppose that the Czech people might be planning a reprise of the Defenestrations of Prague? Such plans can make politicians nervous. Mirek is not fortunate enough to be in Germany, poor chap.

David, those indefatigable journalistic gumshoes at the NYT apparently limited their journalistic efforts to German - quite possibly to Berlin.

Before assessing the success or failure of Europe's social selfare system I would have supposed that the hallowed Times would dig a little deeper, perhaps visit a few countries who have been really suffering from the crash. In Eastern Europe, but not limited to Eastern Europe. Iceland, Ireland, parts of Spain.

Problem is the journalistic hounds of the NYT sometimes better resemble lap-dogs. Like the Queen's Corgis.....

"Yep, Europe is now sooo conservative"

I would call Europe conservative in any real sense.

The meaning of 'conservative' is conserving the society. The free-wheeling gambling bankers of 2006 may have thought they were conservative, but were not. They were radicals.

But compared with a society which produces many fewer children than needed to maintain it's numbers for 30 years or more, those stupid bankers are veritable mossbacks.

A society whose women bear fewer than 1.5 children each is the most radicl of all because doing that means that without doubt that within two generations the society will be virtually unrecognizable to itself.

No, in this sense (and others) Europe is amazingly radical. Europe is unprecedently radical in another sense. The proposed regulation of world financial markets which Sarko and Merkel are 'demanding' the world adopt is nothing less than a demand that the structure of world capital markets be reformed to make the world safe for German pensioners - no other considerations allowed.

A banking system for a young country is necessarily much different than one for a society of pensioners - the Merkel-Srko plan seems intended to force the entire world to adopt a system designed for the needs of a generation of childless aging 68'ers.

It won't be adopted, and if adopted, will not work. Nevertheless 'Europe' seeks to make the world over in it's own image. So does the US, of course, but the US vision has the minor virtue that the demographics of the US are much closer to the average demographics of the world than Europe's are. Nevertheless European critics are entirely correct that the world financial system ought not be designed to US specifications. If Europeans could make the further leap that designing the system to European specifications is at LEAST equally misguided they would be onto something.....

Soli, I'd be surprised if they did have a cunning plan.

Problem is that financial systems have more than one party, they have to make sense for both sides or they don't work.

It's bad enough trying to regulate such a system within national boundaries, much less try to regulate internationally, which is what is proposed. Banking systems are basically a way for the old and rich to lend to the young and the poor, for a profit of course. The more rigid
the standards the smaller the return to the rich and the less credit available for the poor. Make the regulations too stringent and two things will happen:

Some capital will escape the regulatory net, through the Grand Camans or the like, and regulators will have little control over that capital.

'Law-abiding' capital often have incredibly low rates of return historically. After the Dutch 'Golden Age' most Dutch investors had average rates of return on capital of 1-2% for more than a century. In theory this kept the capital safe, but actually not; there are 'black swan' events (like WWI or the Great Inflation) which can and do sweep away even the seemingly most conservative of systems.

Many people think the lesson that Madoff taught us it to avoid theifs, but the real lesson is that steady returns are not possible in the system above a pretty low level, and beware the investment firm who tells you otherwise - they are lying. The business cycle drives returns, and the nature of the business cycle is that some years you will make 25%, but about once a decade you will make a loss, perhaps a big ones, and other years you will make 2%. About once every 60-70 years you will lose your shirt, and that is without factoring in black swans like major wars, etc.

Merkel seems to believe that she can eliminate risk by regulation without hurting returns, much, but the iron law seems to be that real returns demand tolerance of real risk; the trick is to maximise the first while minimizing the last.

That's why it won't work.