The End of an Era?

We've been mostly focusing on the domestic aspects of the financial crisis, but it's important to remember that this is a global crisis. In Europe, the major leaders are coming together to coordinate their responses:

French President Nicolas Sarkozy along with Germany's Chancellor Angela Merkel said Saturday that the "global financial crisis needs a global response."

Ms. Merkel and Mr. Sarkozy were speaking to the press ahead of a summit in Paris of leaders of the European members of the Group of eight leading countries, along with Eurogroup Chairman Jean-Claude Juncker and European Commission President Jose-Manuel Barroso, to discuss the financial turmoil.

"It's a global crisis that requires a global response. In today's world, Europe must show the will for a solution. That will reassure everyone, including savers," Mr. Sarkozy said.

Ms. Merkel said that all countries must take responsibility in sorting out the financial crisis and added that "those who caused the damage will have to contribute to the global effort.

In the past, this sort of coordinated European action would have been undermined by the U.S., and without U.S. support such a proposal would wither on the vine. As Drezner notes, both Japan and Europe tried something similar following the Asian financial crisis a decade ago, but the U.S. scuttled the efforts. If Europe is successful this time around, it may signal the decline of America as the hegemon of the global financial system.