Sneezing on the world

IT HAS long been said that if the American economy sneezes, the rest of the world gets pneumonia. To escape from this syndrome, some foreign leaders have warned against becoming too intertwined with American financial vehicles and markets. But now that the credit contraction US financial firms have provoked is infecting economies around the world, even foreign leaders hostile to Washington have reason not to gloat over America's comeuppance.

Venezuela's President Hugo Chavez warned that the made-in-USA financial crisis will sweep around the world with the force of "one-hundred hurricanes." President Luis Inacio Lula da Silva of Brazil, who has chastised Washington for preaching to others about financial rectitude, acknowledged a painful but obvious truth. "A recessionary crisis in a country like the US," he said, "can bring problems to all countries."

In Europe, the credit squeeze brought to the fore latent quarrels between those who seek European Union-wide solutions to the crisis and countries that do not want their euros to be spent rescuing banks elsewhere on the continent. French President Nicolas Sarkozy, who currently occupies the six-month rotating presidency of the EU, last week proposed a common EU bailout fund for banks of all 27 members; Germany and Britain were ardently opposed.

The reluctance of Europe's largest economies to commit enormous sums to shore up the banks of their smaller neighbors may be understandable. The reluctant governments cannot be sure of the exposure they would be called upon to cover through a pan-European fund for overextended banks in other countries.

Worse yet, once-proud German officials learned over the past few days that one of their biggest lending institutions, an outfit called Hypo Real Estate, needed a bailout that would take more than $70 billion. This unnerving revelation came barely two weeks after Germany's finance minister mistakenly assured his compatriots that the United States was "the source and the focus of the crisis."

Specific as it may be to the EU's internal debates about national sovereignty, the European reaction to the financial turmoil offers a crucial lesson for Americans. The next president will have to seek multilateral cooperation not only on terrorism and nuclear proliferation, but also on rules and regulations for an ever more globalized economy. When the banks of one nation take on risky investments with crazily leveraged debt, banks, businesses, and workers around the world are threatened. If America is too big to fail, it is also too connected to the rest of the world to go it alone.