When the financial crisis, triggered by the collapse of a housing bubble in several important U.S. real estate market, hit in late 2007, the U.S. economy suffered, while European economies initially took a much more gentle hit.
At the time, it looked like those economies were going to avoid the economic pain of the financial crisis almost entirely, because a better regulatory system prevented European banks from making many of the mistake that were pivotal in the U.S. financial crisis.
Four and a half years later, the situation is less clear. The threat of sovereign debt defaults, or default by financial institutions that when push came to shove were backed by sovereigns, even if they had no legal obligation to do so, have brought down Iceland, Ireland, Greece and Portugal, and have Italy and Spain on the brink, and the United Kingdom is in a downturn worse than the Great Depression was for it. These countries are experiencing cuts to public services and unemployment at least as bad and often worse than the worst since the Great Depression hit that the United States experienced peaking a couple of years ago, form which the U.S. has still not fully recovered.
The situation has gotten so bad in Europe that it threatens to rebound back onto U.S. shores and trigger a double dip recession.
Japan is also greatly overextended in sovereign debt, and will not at a crisis point now, could easily slip out of control. The pain there is not as visible mostly because it has endured its "lost decade' followed by another long slump, so the status quo against which current conditions are being evaluated isn't nearly as rosy as it was for the U.S. or Europe.
The root causes of the European sovereign debt crisis are even more obscure than those of the American financial crisis. But, the only really obvious candiate is that they are delayed reaction to the U.S. finanical crisis.
If that analysis is right, then the benefits of financial regulation generally look a lot more suspect.