The mood music from the annual conference of the International Monetary Fund (IMF) in Washington, DC last week (23-25 September) was, unsurprisingly, not great. After all, it is not often that the world stands on the brink of economic disaster. The IMF warned that the looming catastrophe could look a lot like Japan’s ‘lost decade’, when strong economic growth suddenly ground to a halt at the start of the 1990s, and a severe debt crisis swiftly led to a banking crisis. For the eurozone’s decision-makers, the Japanese experience should act as a warning. Instead it seems to paralyse them.

Japan also offers a parallel that fits the behaviour displayed by those trying to sort out our current plight. Olli Rehn, the European commisioner for economic and monetary affairs, and José Manuel Barroso, his boss at the European Commission, together with Herman Van Rompuy, the man supposedly co-ordinating the member states’ response to the crisis, are increasingly resembling the three wise monkeys of Japanese folklore. For too long they have been looking the other way. They admit there is a problem, they talk around the subject, but they ignore what needs to be done.

Of course, they are not the only ones. Greek authorities turned a blind eye to the country’s problems for longer than anyone dare guess. Angela Merkel, Germany’s chancellor, fears upsetting her electorate. Parliaments around the eurozone are not exactly falling over themselves to approve agreements reached on 21 July to strengthen the European Financial Stability Facility, the EU’s bail-out fund.

But while this principally may be a crisis of debt, markets, and national governments, it has also highlighted a problem of leadership in the European Union’s institutions.

A verdict on the role of Jean-Claude Trichet, the president of the European Central Bank, should perhaps wait until his term of office expires at the end of next month. But an expression of which he is fond – that policymakers should be “ahead of the curve” – is a fitting measure to apply to our leaders. It is no exaggeration to say that Barroso, Rehn and Van Rompuy have been behind it. And for some time.

The list of examples is embarrassingly long. But just take the re-capitalisation of eurozone banks. How happy they were when this year’s stress tests indicated that only nine banks needed major bolstering. But the tests did not factor in, to any great extent, the risk of a sovereign default. I see no evil, said Rehn, on 29 August, when he rebutted the suggestion made by Christine Lagarde, the IMF’s managing director, that there needed to be major bank re-capitalisation. Many economic analysts agree with Lagarde. Even Rehn’s colleague, Joaquín Almunia, the European commissioner for competition, appeared to contradict him last week. While the plan that emerged from the IMF’s conference is still unclear, a bank re-capitalisation looks likely to be a major pillar. Ahead of the curve? Hardly.

Perhaps Barroso thought that, in Rehn, he had the ideal man to make him look good. Rehn’s quiet disposition means that he is not someone to steal the limelight. And, in his previous job, as European commissioner for enlargement, he competently oversaw the implementation of policies introduced by his predecessor, without rocking the boat.

But Barroso has not managed to steer a path through the eurozone’s current difficulties either. He has swung from one extreme to the other. He sent markets into a tailspin when, on 3 August, he suggested that the 21 July agreement had not gone far enough and that contagion was spreading.

Since that outburst he has preferred to make grand statements about the future. (“This is a fight for what Europe represents in the world,” he told the European Parliament earlier this month.) He appears to prefer rhetoric to grasping the nettle and convincing national leaders to take drastic measures now to solve the financial crisis. Talk of Eurobonds and financial transaction taxes are all well and good, but they are not tackling today’s challenges.

And then there is Van Rompuy, the man put forward by Merkel and France’s President Nicolas Sarkozy to chair a formalised group of leaders of countries that use the euro.

Like Barroso, he likes to talk of European integration as the main way out of the crisis. He admitted on 30 July that he was “astonished” that, since the 21 July deal, Spain and Italy had seen their cost of borrowing rise further. He should not have been. Last week, he made a series of speeches in the US that gave little indication that he understood the seriousness of the situation. In one, he described himself as a “poet lost in politics” and, all too clearly, his beloved Japanese haiku offer little advice on avoiding a lost decade.

Earlier in the year his ‘euro-plus pact’ was watered down so much it barely resembled his original proposals for stronger economic governance. He is working on a set of proposals on fiscal union, to be unveiled at the European Council on 17-18 October. But in the current crisis it appears to be mere driftwood in the financial markets’ raging torrent.

If the three wise monkeys are to help prevent a Japanese-style lost decade, they need to uncover their eyes and ears. And their words need to show that they understand the gravity of the situation.

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