WASHINGTON (Reuters) - U.S. President George W. Bush announced on Saturday he would host a global summit on the financial crisis, signing on to European proposals to coordinate strategy amid the biggest economic debacle since the Great Depression.
“It is essential that we work together because we are in this crisis together,” Bush said before a meeting at the Camp David presidential retreat with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso.
“Together we will work to modernize and strengthen our nations’ financial systems so we can help ensure this crisis doesn’t happen again,” Bush said.
He said he expected a summit “in the near future.”
Sarkozy has called for an overhaul of the international financial architecture established just after World War Two at the 1944 Bretton Woods conference, and said on Saturday the summit could be held in New York before the end of November.
“Why must we make haste?” Sarkozy said. “We must make haste because we must stabilize the marketplace as swiftly as possible while coming up with answers.”
U.N. Secretary-General Ban Ki-moon, who met Sarkozy in Canada on Saturday, offered the U.N. headquarters in New York for a meeting that should take place “in early December at the latest.”
Fears of a full-blown recession were fueled by figures showing sharp declines in U.S. consumer confidence and new-home construction, and stock markets around the world remain volatile as investors count their losses and ponder when the financial gloom may ease.
Despite the uncertainty European shares ended higher on Friday. The U.S. Dow Jones Industrial average ended 127 points down on Friday, but was still up 4.75 percent on the week.
Another glimmer of light appeared as interbank lending rates fell this week for the first time since July, providing some hope that the worldwide credit drought may be easing.
But the overall picture continued to look grim. Financial institutions worked to help crisis-hit countries, with Ukraine saying it may receive up to $14 billion from the International Monetary Fund to stabilize its economy.
The IMF, meanwhile, said it was investigating whether its chief Dominique Strauss-Kahn abused his power in an affair with a subordinate who has since left the institution — an embarrassing distraction as global leaders review how the world organizes its financial affairs.
Sarkozy, whose country now holds the rotating presidency of the European Union, said the summit would provide an opportunity to reassess the entire global financial system.
The French leader has advocated a new form of “regulated capitalism” and last week suggested that one step could be a review of the relationships between major world currencies such as the euro and the U.S. dollar.
“It would be wrong to challenge the foundations of market economics. But we cannot continue along the same lines because the same problems will trigger the same disasters,” he said on Saturday.
British Prime Minister Gordon Brown has also advocated reforms including a regulatory forum to monitor risks in the financial system, tough new disclosure and due diligence rules and guidelines on executive pay.
Bush, who leaves office in January after the November 4 U.S. presidential election, stressed on Saturday that the basic principles of democratic capitalism — free markets, free trade and free enterprise — should be respected.
“We must resist the dangerous temptation of economic isolationism (and) continue the policies of open markets that have lifted standards of living and helped millions of people escape poverty around the world,” Bush said.
He said he had discussed the summit with Prime Minister Taro Aso of Japan, the current chairman of the Group of Eight industrialized nations, and that both developed and developing nations would be represented at the meeting.
“For this meeting to be a success we must have ideas from around the world,” he said.
Treasury Secretary Henry Paulson and Secretary of State Condoleezza Rice accompanied Bush to Camp David.
The summit was announced amid as the credit crunch continued to squeeze countries across the globe.
Iceland, pushed close to financial collapse by the bank crisis, faced more uncertainty as Russia indicated it was not yet convinced it should issue it a loan.
In Russia, Finance Minister Alexei Kudrin said investors had pulled $33 billion out of the country from August through September.
In the banking sector, which has been at the heart of the crisis, Dutch bank ING, the Netherlands’ biggest listed bank, said it expects its first quarterly loss ever, sending its shares to a 13-year low.
A Reuters/University of Michigan survey said U.S. consumer confidence in October suffered its steepest monthly drop since the survey began in 1952. Earlier, a U.S. government report showed construction starts on new homes fell to their slowest pace since January 1991.
“Confidence is collapsing so that’s not good even as you have gas prices falling,” said Doug Smith, chief economist for the Americas at Standard Chartered in New York. “People are seeing what’s happening to their 401ks, stocks and home prices. It’s just awful.”
Additional reporting by Tabassum Zakaria at Camp David, Lesley Wroughton in Washington, and Reuters bureau around the globe. Editing by Doina Chiacu