Canada and France back overhaul of financial system

QUEBEC CITY (Reuters) - Canadian Prime Minister Stephen Harper said on Friday he agreed with French President Nicolas Sarkozy on the need to overhaul the infrastructure in which global markets operate to prevent future financial shocks.

Meeting a day ahead of Sarkozy's meeting with U.S. President George W. Bush, the leaders agreed on the need for an international summit before the end of the year "to restore confidence and the normal functioning of the financial system."

Harper said a date needed to be set as soon as possible, and Sarkozy again said he preferred it take place before the end of November. He also said it should include more than the Group of Eight (G8) leading industrialized nations.

"It would seem strange to me to have a summit on financial matters without China, and also strange without India -- in fact, without the G5," Sarkozy said, referring to the big five emerging economies of China, India, Mexico, Brazil and South Africa.

Sarkozy even suggested an Arab country be invited.

He told a joint news conference with Harper and European Commission President Jose Manuel Barroso that he hoped Saturday's meeting with Bush would yield progress toward a date and the format of summit with precise goals.

Sarkozy spoke again of the need to overhaul the system, and Harper echoed his words in saying the current international infrastructure was established just after World War Two at Bretton Woods.

"Clearly in the world of globalization, our institutions and our capacity to act have not kept up with other developments, and we're seeing some of the consequences of that, and we have to have new infrastructure," Harper said.

"It's not to say capitalism is flawed, it's to say that governments have a responsibility to create a better infrastructure for the establishment of markets internationally," he said.

France currently holds the rotating presidency of the European Union.

(Reporting by Randall Palmer; Editing by Frank McGurty)