EU "Big Three" urge global finance shake-up

By Francois Murphy and Darren Ennis

BRUSSELS (Reuters) - France, Britain and Germany led calls on Wednesday for an overhaul of the world's financial system aimed at preventing a repeat of the worst credit crisis since the Great Depression while markets slumped again.

French President Nicolas Sarkozy told an EU summit that a "new form of capitalism" was needed, as European fears grew that the U.S. subprime debacle could plunge the global economy into recession despite unprecedented rescues of banking giants.

His proposal for talks on reforms to financial architecture won acceptance from the United States, Japan and Russia, which put their name to a Group of Eight statement saying a meeting could be held "at an appropriate time in the near future."

Concern about a deepening slowdown wiped away optimism earlier this week that the worst of the crisis was over, with global stock prices falling sharply once again on recession fears and investors scurrying into safe havens such as gold.

"We are not at the end of the crisis. We are still living in dangerous times," Luxembourg Prime Minister Jean-Claude Juncker, chairman of 15 euro zone finance ministers said on arrival.

The 27 EU leaders broadly endorsed a concerted 2.2-trillion euro ($3,023 billion) rescue plan for banks agreed on Sunday by the 15 countries that share the euro single currency, Spanish Finance Minister Pedro Solbes said.

Sarkozy said the credit crunch was "one crisis too many" after the bubble of enthusiasm about a new Internet-driven economy burst in 2001.

"The system must be completely overhauled, an overhaul that must be global," Sarkozy told other EU leaders, repeating his call for an international summit before the end of the year, "preferably in New York where everything began."

"A new form of capitalism is needed, based on values which put finance at the service of business and citizens, and not vice versa," he said, according to a copy of his speech.

BIG CHANGES

British Prime Minister Gordon Brown joined his call for a summit and urged a rebuilding of the International Monetary Fund (IMF) as the keystone of global market regulation.

"I believe a forum to decide on big changes in the international economy can be held in the next few months," he told a news conference, adding he expected the Group of Eight top economies and key emerging nations such as China, India, Brazil and South Africa to gather in November or December.

Germany also backed the idea, which Sarkozy has pushed as the fastest way of revamping international financial structures set up over 60 years ago at the 1944 Bretton Woods conference.

"While our focus now is on the immediate task of stabilizing markets and restoring confidence, changes to the regulatory and institutional regimes for the world's financial sectors are needed to remedy deficiencies exposed by the current crisis," G8 leaders said in a statement released by the White House.

The G8 includes the United States, Japan, Canada, Russia, Great Britain, France, Germany and Italy.