Europe enters crisis mode after delay and denial

By Noah Barkin

BERLIN (Reuters) - First came denial, then outrage, and finally, as the breadth of the financial crisis sank in, frenzied attempts to limit the damage.

The turmoil that sent shockwaves around the world last month has presented Europe's politicians with formidable challenges and their responses have been at once forceful and flawed.

A look at their reactions to the upheaval that erupted in mid-September after the shock bankruptcy of U.S. investment bank Lehman Brothers, suggests many were slow to realise the scope of crisis and the speed with which it would spread across the Atlantic and wreak havoc closer to home.

It took some leaders, like French President Nicolas Sarkozy, the better part of a week to speak out on the financial woes that sent global stock markets careening lower.

Once "Sarko" engaged, however, he moved quickly to coordinate with his European partners and played a lead role in arranging a bailout of Franco-Belgian bank Dexia (DEXI.BR).

Others, like German Chancellor Angela Merkel and her Finance Minister Peer Steinbrueck, reacted swiftly to market gyrations, but played down the impact of the crisis in its first week.

Both were quick to blame the turbulence on the United States, Britain and their "Anglo-Saxon" capitalist model.

Based on their public statements, Berlin appears to have underestimated the consequences of the turmoil for Germany, sending reassuring signals about the stability of domestic banks late last week before scrambling to inject of billions of euros into troubled lender Hypo Real Estate HRXG.DE.