The Last Model Standing Is France.(Global Investor)

Byline: Holger Schmieding; Schmieding is chief European economist at Bank of America.

For better or worse, French-style intervention is gaining the upper hand as other economic models lose credibility.

The global recession takes its toll not only on those who lose their jobs, their houses or a chunk of their retirement savings. The crunch of the century is also sweeping aside many established ideas of how societies should run their economies. This impact will still be felt when the recession has long given way to a new upswing.

Of course, it is too early to assess how the global economy will look when the dust has settled. But in Europe, some trends are emerging. For better or worse, French-style pragmatic interventionism is gaining the upper hand as other economic models have lost credibility.

First and foremost, the British model of turbocharging the business cycle with excessive private or public borrowing has failed the test of time. It will be a long time before households in Britain, and in the United States and Ireland for that matter, will again be willing and able to treat their houses as piggy banks, taking out ever bigger mortgages on seemingly unstoppable increases in house prices.

Ten years ago, Britain's Gordon Brown had promised to put an end to "boom and bust." He delivered an artificial surge in economic growth driven by runaway public spending, followed by a big bust. As the economy now contracts sharply, Britain's budget deficit looks set to reach almost 10 percent of GDP in 2009. Previous British claims that it is managing its economy better than other European countries now ring rather hollow.

However, German ideas of strict monetary and fiscal rectitude have also been undercut by the crisis. The European Central Bank, designed as a clone of Germany's stability-minded Bundesbank, initially got its policies right. While the U.S. Fed cut interest rates all the way down to 1 percent in 2003, the ECB stopped at 2 percent, helping Europe avoid the worst of the U.S.-style credit and housing market boom-bust cycle.