I don’t think a lack of domestic consumption is the reason for Europe’s recent bank problems. So cutting their interest rates a year ago probably would not have helped much.
In the US, there was a major reliance on increasing asset prices, and almost the entire population built its economic plans around that. Lots of real economic resources were allocated inefficiently as a result.
In Europe, there was also some reliance on increasing asset prices, but it was less pervasive and less extreme. It certainly occurred in Ireland, Spain, the UK, and to a lesser extent in several other countries. It didn’t happen much in Germany. Note that the Hypo Bank problems are caused by non-German assets. So they will certainly have problems, but they will be a little less severe than the US.
