Until now, Europe had been watching the crisis unfolding on Wall Street from afar. In a Sept. 25 address to the Bundestag, the German parliament, the country’s finance minister said the financial crisis is a U.S. problem and that the U.S. will lose its status as a financial superpower due to the latest crisis. Even when the U.S. government proposed European governments spend public money to deal with non-performing loans, they said there was no need for such measures.

Now the situation has reversed. Over the past week in Europe, five financial institutions have become nationalized or been given government rescue funding. Financial institutions that have been pushed near bankruptcy have received taxpayers’ money, but a vicious cycle is taking place where financial markets are becoming more frozen amid fears that more banks could collapse, thereby making it more difficult for financial institutions to raise money.

Many point out that European banks are structurally more at risk than American banks. Loans by U.S. commercial banks amount to around 96 percent of their deposits, but that ratio is 140 percent for European banks. Until now, European banks have borrowed from the capital markets to fill the gap between loans and deposits. But that route of funding is blocked due to the financial crisis. On top of that, many financial institutions in Europe are teetering on the verge of bankruptcy as the region sees its real estate bubble bursting, while losses from investments in U.S. subprime mortgage loans add to the burden.

The reason why the situation has gotten this bad is because individual European countries have been struggling to stay alive alone. It has been some time that the European financial crisis had transcended the level of individual banks and individual countries and gripped the entire financial system. The economically united European Union should have come up with a comprehensive set of measures like the U.S. bailout plan, but conflicting political interests have made it more difficult to resolve the situation. We should not be watching the situation in Europe as if it was happening on the other side of the world. Just as Europe’s complacency brought about this crisis, the rosy view that we have ample U.S. dollar reserves or that we have been regulating mortgage loans for several years could worsen the situation for us.

In the present circumstances, where there is no central command coordinating economic and financial policies, while foreign exchange and financial operations have been dispersed through different government ministries, inter-ministerial cooperation is crucial. The finance minister and the central bank governor, head of the Financial Services Committee, Financial Supervisory Service and other officials should form an emergency committee to check the economic situation on a daily basis and come up with necessary measures as soon as possible.