Why Europe will suffer more

Europeans have a tendency to call the financial crisis a US problem, or a crisis precipitated by the “Anglo-Saxon” model. The data suggest otherwise. Moreover, the corporate sector in Europe has a much lower capacity to finance investment from internal sources of funds, which implies that a recovery of investment in Europe will be much more difficult than in the USA, as long as the banking sector remains weakened by excessive levels of leverage. The cost of the crisis could thus be much larger in Europe than in the USA.