Does Europe have leagues that
A. play primarily on tables smaller than 9'
B. reward sandbagging
I don't think the top players anywhere are into the leagues that much. That is only for the casual players who don't much care for serious competition or those that are interested in pool to stroke their egos when they win, not play good with winning as a secondary thing that happens.
I do think that handicap leagues bring down the average level of play in the country overall, but they don't have much of an affect on say the top 20 players in a country. Just on those bangers that stay bangers forever because they don't care to get better to win more due to free games given to them or the lack of people that care enough to teach them. The players that are serious about getting better will track down the tougher tables and matches on their own, I think that is the issue, they are on their own. There is no organization you can find that caters to growing pool players in the US so it's almost by accident can good players find coaching and instruction to start at a sold foundation to get better from. Many play for years with flawed mechanics before someone starts to teach them and by then it may be too late to get to the top levels.