Market unrest shows depth of U.S. and European divide

By Emily Kaiser and Brian Love - Analysis

WASHINGTON/PARIS (Reuters) - The answer to the pressing question of how to manage the global financial crisis might depend on which side of the Atlantic you are on.

A gut-wrenching slide on global financial markets this week once again exposed centuries-old divisions between European and U.S. philosophies when it comes to coping with economic crises.

European officials have taken a more patient approach so far, resisting mounting pressure to follow the U.S. Federal Reserve's aggressive lead in trying to revive the sagging economy.

In part, it reflects different economic realities of the two regions. But it also points to strong cultural differences: In the United States, there is a sense of limitless economic possibilities. In Europe, there is a stronger belief in the recurring cycle of bigger events outside anyone's control.

"Americans tend to be more optimistic...Everybody's got the American dream," said Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government. "Europeans are more fatalistic."

While the U.S. Fed made the biggest rate cut on record, the European Central Bank stood pat.

As the tighter credit conditions curbed spending in both regions, the Fed responded with an emergency interest rate cut on Tuesday, its deepest in more than two decades. The ECB still insists that euro zone growth will remain near potential, and inflation poses the greatest risk to the economy.

Fed critics contend that the U.S. central bank is blissfully ignoring the risk that its rate cuts will reward Wall Street for lax lending, and inevitably inflate another asset bubble that will some day burst.