It may seem surprising now, but during the Wall Street crash of 1929 not everyone was worried. The Economist, for one, welcomed “the deflation of the exaggerated balloon of American stock values” which it thought would be “for the good of the world”. Others drew solace in the old City joke that the stock market had predicted nine out of the previous five recessions.

There has not been much joking in the past few days. Apart from a few musty old Marxists and crusty young anticapitalists, nobody can be relaxed about this financial meltdown. It is a crisis, of course, that started in the credit and money markets rather than the stock market. But the headlong plunge in share prices tells us that it has spread to the real economy.

After an International Monetary Fund forecast of a sharp slowdown in the global economy and a recession in Britain, the markets are spooked. The complex deals by banks are being exposed. Credit default swaps and other exotic financial jiggery-pokery have popped up with sickening familiarity. Three-month Libor has become all-important, if largely incomprehensible to most of the population.

Behind this outbreak of curiosity in financial esoterica is the growing realisation that the banking system is broken. That means there can be no properly functioning economy. The urgent task, therefore, has been to fix banking. The stock market’s fall of more than 20% last week was a reminder of the urgency.

Since the financial crisis broke in August last year, Gordon Brown and Alistair Darling have dithered in a way that has hurt taxpayers and undermined confidence in the economy and the banking system. Their handling of Northern Rock was a lesson in how not to do these things.

However, the threat to his leadership has greatly concentrated Mr Brown’s mind; all of a sudden he is tap-dancing across the economic stage. Hustling HBOS into the arms of Lloyds TSB was astute and the nationalisation of Bradford & Bingley was done with a minimum of fuss. Last week’s rescue plan for the banks was a vast improvement on Henry Paulson’s hastily assembled package in America.

However, many will balk at what amounts to part-nationalisation of the banks and in some cases taxpayers could end up with a majority stake. They will justifiably wonder whether their good money, in the form of £250 billion of government guarantees, may pursue bad money just a bit too eagerly. The record of this government, indeed any government, in spending our money wisely is poor.

These are extraordinary times, however. Most so-called experts had advocated such a scheme and the prime minister can claim some credit, and will, for being the first to come up with it. Now is the time for action elsewhere.

Last weekend we witnessed the farce of European cooperation. A high-level meeting of leaders on Saturday, which called for countries to work closely together, was followed on Sunday by Angela Merkel, the German chancellor, apparently going it alone. The consequences of countries doing their own thing in the 1930s led to protectionism and competitive devaluations, which made a bad situation worse. It would be no different today.

Countries must work together. There were a few hopeful signs in Washington this weekend but not enough. Mr Brown will meet Nicolas Sarkozy, the French president, in Paris this evening for what could be a last chance to steady things before the febrile markets open tomorrow. Europe is not good in a crisis. It needs to show that it can be in this one.