EU vows to shield economy from financial fallout

BRUSSELS (Reuters) - European Union leaders called on Thursday for action to preserve growth and jobs and maintain industrial competitiveness as the worst financial crisis for 80 years raised fears of a deep recession.

The 27 leaders said a forthcoming international summit to reform the global financial system should take early decisions on transparency, global standards of regulation, cross-border supervision and an early warning system to restore confidence.

Despite the crisis the EU agreed to stick to a December deadline for adopting ambitious legislation to fight climate change. But in a concession to Poland, worried at the cost of greenhouse gas curbs to its coal-based economy, the final decision will be taken by unanimity and not majority voting.

French President Nicolas Sarkozy said he and European Commission President Jose Manuel Barroso would travel to meet U.S. President George W. Bush on Saturday to help prepare for a summit that would decide on a "refoundation of capitalism."

Having won the backing of other major economies including the United States for the meeting, EU leaders turned their attention to the likely impact of the credit crunch on their own real economies.

A Reuters poll of economists on Thursday found 34 out of 41 surveyed believe the euro zone is already in recession and most say it will last between six months and a year.

"Of course we see that the economic crisis is there, and the question I asked was: if we can bring coordinated answers to the financial crisis, can we not bring a coordinated answer to the economic crisis?" Sarkozy said, pledging that current EU president France would take initiatives on the matter.

British Prime Minister Gordon Brown said market uncertainty would continue until action to rescue banks and stabilize the financial system had been finalized around the world.

"Outside the financial sector, the European Council (summit) underlines its determination to take the necessary steps to support growth and jobs," the final summit statement said.

"It calls on the European Commission to make appropriate proposals before the end of the year notably to preserve the competitiveness of European industry."

Sarkozy said he had asked the EU executive to look into whether the European auto sector needed help, given it was being asked to build greener cars at a time when the United States was supplying cheap loans to its big three car makers.

NO STIMULUS PROGRAMME

The chairman of euro group finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said there was no question of any pan-European economic support program or fiscal stimulus, which would breach EU budget rules. Diplomats said Britain insisted on removing references to the need to react to a slowdown in demand and the contraction in investment.

Leaders expressed solidarity with Iceland, particularly hard hit by a financial meltdown that threatens thousands of European savers, and urged support from the international community.

The statement called for the first time for a coordinated system of financial supervision at EU level and the creation of a crisis cell to help manage the financial turmoil.

As a first step, German Chancellor Angela Merkel told reporters, national central bank governors will meet at least once a month to exchange information on financial supervision.

The heads of the European Central Bank, the EU presidency, the executive European Commission and the Eurogroup of 15 countries that share the euro currency will all take part in the financial crisis management cell.

Global markets continued to fall on Thursday despite the expressed willingness of authorities around the world to take further action to support banks in trouble.

Sarkozy attributed the slump to heavily indebted hedge funds selling off assets as well as to investors' concerns about poor economic indicators.

Brown joined Sarkozy's call for the global summit to rebuild the International Monetary Fund (IMF) as the keystone of global market regulation.

The summit statement said the 27 EU leaders unanimously endorsed a concerted 2.2-trillion euro ($3 trillion) euro zone rescue plan for banks agreed in Paris on Sunday.

(additional reporting by Francois Murphy and Mark John, writing by Paul Taylor, editing by Myra MacDonald)