Germany, UK urge global economic overseer

By Mike Dolan and Stella Dawson

DAVOS, Switzerland (Reuters) - Germany and Britain called on Friday for a global economic watchdog with strengthened powers to prevent rather than react to financial crises that can spiral into worldwide recession.

Cooperation amongst international financial institutions has failed to ward off the worst financial crisis in decades and a new charter should be forged, German Chancellor Angela Merkel told the World Economic Forum in this Swiss ski resort.

"This may even lead to a U.N. Economic Council, just as the Security Council was created after the Second World War," she said.

While she spoke, business leaders and financial policymakers met behind closed doors at Davos to lay the groundwork for new regulatory structures and seek consensus on shaping a global response to the economic and financial shocks.

British Prime Minister Gordon Brown, who is spearheading global financial reform as chairman of the Group of 20 leading developed and emerging economies, said bold action was needed to get banks lending again and repair the financial damage.

"We are prepared to consider radical options. The old ways have not worked. We've got to rebuild the financial system," he said.

The International Monetary Fund, set up by the Bretton Woods agreement in 1944, was outdated and focuses on cleaning up the mess when a country faces currency and debt crises. A different approach was needed, he said.

"What you've got to do is have a preventative facility which deals with crisis prevention rather than crisis resolution," said Brown, who will host a G20 leaders summit in April.

Missing from the Davos debate over reshaping the international financial architecture for a globalize world, however, was the United States -- the world's largest power.

No officials from the newly installed Obama administration attended.

Yet U.S. President Barack Obama's rallying call for change was reflected in the words of political leaders at the four-day Davos gathering as they urged cooperation in solving problems.

"What we are seeing at the moment is thousands of people in every country of the world losing their jobs, thousands in fear of losing their homes, thousands of businesses going under.

"We can -- yes, your slogan -- yes we can do something about it. And we ought to be working together," said UK's Brown.

Mexican President Felipe Calderon said Obama's election was

cause for optimism over global cooperation.