* Restrictive financial measures not helpful - Rousseff
* EU, Brazil “need deal to cut business costs” - BusinessEurope
* BusinessEurope rejects EU financial transaction tax (Adds details, quotes from Rousseff, BusinessEurope)
BRUSSELS, Oct 4 (Reuters) - Brazil and the European Union must take concerted action to calm markets fearful of global contagion spreading from Europe’s debt crisis, leaders from both sides said on Tuesday.
“It is fundamental that there be political coordination among countries to face up to the current international situation,” Brazilian President Dilma Rousseff told journalists after meeting officials at the European Union Council and European Commission.
“The absence of effective regulation over the financial system lies at the root of the problem,” she said.
The economy was the focus of the annual summit, which traditionally deals with trade and investment relations. The EU’s inability to mount an effective response to its debt crisis has frustrated Brasilia, Washington and Beijing, and market confidence has crumbled amid fear of global recession.
Leaders said more effective financial regulation was vital to preventing future crises and stopping problems in individual economies from spreading to other countries and regions.
“We need to reform global financial architecture so as to avoid financial crises in future,” EU President Herman Van Rompuy told EU and Brazilian business leaders later on Tuesday.
He said that EU leaders, who meet later this month, and a gathering of G20 leaders in Cannes, France in November, would have to show a more unified response to the economic troubles.
“Strong and coordinated action will be necessary to avoid the global economy falling back into recession,” he said.
“The EU and Brazil will cooperate closely to prevent this from happening at the G20 summit in Cannes ... We need more cooperation on trade and exchange rates.”
Rousseff’s country lived through its own debt crisis in the 1980s before emerging as an economic power, and she said that “recessive fiscal adjustments” when Brazil had debt problems had only deepened the stagnation.
“We will only be able to exit the crisis through stimulation to economic growth,” she said. On her first trip to the EU as president, Rousseff took no questions from the press.
The EU is Brazil’s main trading partner, and EU investment in Brazil accounts for more than the bloc’s combined investments in China, India and Russia, according to EU data.
Brazil wants more EU investment and participation in its booming high-tech industries, including telecoms and oil extraction and refining.
The EU wants to benefit from a Brazilian economy that grew 7.5 percent last year, its fastest pace in 24 years.
However, talks on a free trade pact between the EU and the Mercosur region, led by Brazil and Argentina, are deadlocked.
Philippe de Buck, Director General of Europe’s leading business lobby BusinessEurope, said leaders should find other ways to cut down the cost of doing business.
“The (EU and Brazilian) business community is really asking for urgent measures in order to increase trade flows and investment,” he said.
“There is a lot that we can do bilaterally with Brazil, on investment, services, telecom deregulation and convergence on sectors such as transport.”
Talks between the two sides will continue on Wednesday on how to simplify Brazilian taxes on foreign investors. They will also discuss contentious plans tabled by the EU’s executive Commission to tax transactions such as trading in bonds and shares - a plan opposed by Europe’s business community.
“We can agree on a lot of what (EU Commission President Jose Manuel Barroso) has said, apart from the financial transaction tax. This is not the time to do that,” de Buck said. (Reporting by Juliane von Reppert-Bismarck; Editing by Sebastian Moffett and Andrew Roche)