To many Americans, financial reform in Europe may seem like a faraway issue about which they care little, but any such perception would be a mistake. The ability of the European Union — and particularly the euro area — to make its financial system safer is of fundamental importance not just for its economic prospects but also for what happens next around the world.

“Europe accounts for more than a quarter of the world’s gross domestic product and its banks are big, with more than $25 trillion in total assets. (The G.D.P. of the United States is around $16 trillion, and the E.U. is slightly bigger, depending on which exchange rate you use.)

“There are two perspectives on what is happening.

“The first is that of the European Commission and others who spend time in continental conference rooms: ‘We have done a lot’ and ‘we are making progress.

“The second view is more widely held among skeptical outsiders: there is a great more deal to do; Europe is at risk of falling behind even the United States, where reforms have hardly been carried out with alacrity; and, most worrying, Europe may be on course to settle for lower equity capital in its banks than the United States ultimately will. Without question, the European Commission and its allies have guided through a great deal of change. The question is not the diligence or hard work of the people involved but rather the obstacles they face, particularly at the national level, including some in France and Germany.”

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Read Simon Johnson’s full New York Times Economix blog post here