Some members of the European Union (EU) initially viewed the financial crisis as a purely American phenomenon. That view has changed as economic activity in the EU declined at a fast pace over a short period of time. Making matters worse, global trade declined sharply following the financial crisis, eroding prospects for European exports providing a safety valve for domestic industries that are cutting output. In addition, public protests, sparked by rising rates of unemployment and concerns over the growing financial and economic turmoil, increased the political stakes for EU governments and their leaders. The global economic crisis has strained the ties that bind together the members of the EU and presented a significant challenge to the ideals of solidarity and common interests. In addition, the longer it takes to regain economic growth, the greater are the prospects that international pressure will mount against those governments that are perceived as not carrying their share of the responsibility for stimulating their economies to an extent that is commensurate with the size of their economy. According to Dennis Blair, Director of U.S. National Intelligence, the global financial crisis and its geopolitical implications pose, "the primary near-term security concern of the United States." In addition, he said, "The longer it takes for the [economic] recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests. Roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown." Various EU governments expended public resources to rescue failing banks, in addition to protecting depositors and utilizing monetary and fiscal tools to support banks, to unfreeze credit markets, and to stimulate economic growth. These efforts have born modest progress so far. The economic recession and the financial crisis had become reinforcing events, which were forcing EU governments to forge policy responses to both crises. As the loss of real and financial wealth persisted EU governments worked both independently and in concert to address the immediate requirements of protecting financial institutions and improving access to credit by households and businesses. The differential effects of the economic downturn, however, have divided the wealthier countries of the Eurozone from the poorer countries within the EU and in East Europe and has compounded efforts to respond to the financial crisis and the economic recession. At the G-20 summit in Pittsburgh in September 2009, the participants agreed to coordinate their actions on a number of financial reform issues. As the financial crisis has eased, however, coordination has proved to be more elusive. EU banks have been slower than U.S. banks to meet higher capital standards and less forthcoming in detailing their financial condition. The United States, Britain, and continental European regulators also have forged different policies regarding the issue of executive compensation. EU finance ministers also disagree over strict new regulations that would have imposed restrictions on American hedge funds operating in Europe. U.S. Treasury Secretary Geithner has called the new rules protectionist. The measure would have barred foreign hedge funds from operating in Europe unless standards similar to those that are enforced in Europe were enforced in the home countries. British, in particular, has opposed the rules that are favored by the French and the Germans, in part because nearly 80% of European hedge funds operate out of Britain and are a major source of income. For the United States and the members of the European Union the stakes are high. Over the short run, both the EU and the United States attempted to stop the downward spiral in the financial system, improve the financial architecture, and restore balanced economic growth. Over the long run, they likely will search for a regulatory scheme that provides for greater stability while not inadvertently offering advantages to any one country. The financial crisis and the economic downturn had become global events and dominated the attention of policymakers. Governments that expended considerable resources utilizing fiscal and monetary policy tools to stabilize the financial system and to provide a boost to their economies may yet be required to be more inventive in providing more stimulus to their economies and face political unrest in domestic populations. EU members have been concerned over the impact the financial crisis and the economic recession have had on the economies of East Europe and prospects for political instability as well as future prospects for market reforms. Worsening economic conditions in East European countries could compound the current problems facing financial institutions in EU members. While mutual necessity dictated a more unified position among EU members and led to increased efforts to aid East European economies, some observers are concerned over the long-term prospects of the East European economies. Governments elsewhere in Europe, such as Iceland and Latvia, collapsed as a result of public protests over the way their governments handled their economies during the crisis, and the International Monetary Fund issued emergency loans to Hungary ($15.7 billion) and Ukraine ($16.4 billion). In addition, the IMF has issued loans to Belarus (2.48 billion), Bosnia and Herzegovina ($1.52 billion), Iceland ($2.1 billion), Latvia ($2.35 billion), Moldova ($118.2 million), Poland ($20.58 billion), Romania ($17.1 billion), and Serbia ($4.0 billion). The World Bank in a joint effort with the European Bank for Reconstruction and Development and the European Investment Bank announced on February 27, 2009, that they were providing $31 billion over two years to assist ailing banks and businesses in Eastern and Central Europe. East European countries have experienced a sharp depreciation in their currencies relative to the Euro and the economic crisis is causing their government deficits to rise, undermining the efforts of some of the countries to join the Eurozone. Banks in the EU have nearly $1.5 trillion in assets potentially at risk in Central and Eastern Europe. The data in Table 1 include the exposure of the major Western European banks for East European countries and the Russian Federation. Despite this exposure to banks in Eastern Europe, EU leaders, at a meeting on March 1, 2009, reportedly could not agree on a common approach to the financial crisis and rejected a call by Hungary for financial support for Eastern Europe. Even the East European participants could not bridge their differences and present a unified approach to the EU. Some East European countries pushed for substantial financial assistance from the EU, while other countries expressed little interest in receiving financial assistance. The crisis has underscored the growing interdependence between financial markets and between the U.S. and European economies. As such, the synchronized nature of the current economic downturn probably means that neither the United States nor the EU is likely to emerge from the financial crisis or the economic downturn alone. The United States and the EU share a mutual interest in developing a sound financial architecture to improve supervision and regulation of individual institutions and of international markets. This issue includes developing the organization and structures within national economies that can provide oversight of the different segments of the highly complex financial system. This oversight is viewed by many as critical to the future of the financial system because financial markets generally are considered to play an indispensible role in allocating capital and facilitating economic activity. Congress and the Obama Administration are considering a number of proposals to restructure the supervisory and regulatory responsibilities over the broad-based financial sector within the United States. At the same time, such international organizations, as the G-20, the Financial Stability Forum, the International Monetary Fund, the Organization for Economic Cooperation and Development, and the Bank for International Settlements have offered their own prescriptions for the international financial markets. As policymakers address the issue of financial supervision, they likely will weigh the costs and benefits of centralizing supervisory responsibilities into a few key entities, such as the Federal Reserve, or dispersing them more widely across a number of different entities. A centralized approach may avoid the haphazard way in which certain complex financial markets and transactions went largely unregulated. On the other hand, a broader dispersion of supervisory responsibilities may yield a more specialized approach to market supervision. In the United States, the Federal Reserve holds a monopoly over the conduct of monetary policy, mainly as a means of keeping such policy-making independent of political interests. The Federal Reserve also shares regulatory and supervisory responsibilities with a number of different agencies that are more directly accountable to elected officials and are subject to change. The EU system, however, is different from the U.S. system in ways that may complicate efforts at coordination. For instance, the European Central Bank is not strictly comparable to the Federal Reserve in both scope of its regulatory role and its role in supervising banks. In the EU system each EU member has its own institutional and legal framework for regulating its banking market, and national supervisory authorities are organized differently by each EU country with different powers and accountability. On various occasions over the past several months, EU leaders have discussed the need to develop a common set of rules that could help regulate financial markets and prevent another financial crisis. What has emerged, however, is a lack of consensus over the details of such a regulatory scheme. On February 22, 2009, leaders and Finance Ministers from Germany, the United Kingdom, France, Italy, Spain, the Netherlands, Czech Republic, and Luxembourg met in Berlin to map out a common approach to overhauling financial rules in preparation for the G20 meeting in London on April 2, 2009. A position paper prepared by German Finance Minister Peer Steinbruck set out five areas of discussion for the European leaders: (1) transparency and accountability; (2) enhancing "sound regulation; (3) promoting integrity in financial markets; (4) strengthening international cooperation; and (5) reforming international financial institutions. Beyond these vague goals, the group has not been able to provide a detailed roadmap of how to achieve a new financial architecture, or to gain a unified approach within the broader membership of the EU. The European leaders also considered proposals for the G20 meeting that would require banks to increase their capital resources in periods of faster economic growth. Reportedly, the Ministers also discussed the growing economic problems in Eastern European countries, tax havens, trade protectionism, and a $500 billion fund for the International Monetary Fund to deal with economic crises.