EU heads back financial clampdown
European leaders in Berlin have agreed on the need to regulate all financial markets including hedge funds.
Leaders of Europe's major economies said a global solution was needed to the current financial crisis.
German Chancellor Angela Merkel highlighted that leaders faced an "extraordinary international crisis".
But leaders including UK Prime Minister Gordon Brown warned against reverting to protectionism in such a difficult economic climate.
The Berlin gathering is a precursor to the next meeting of the G20 group of major developed and developing countries in London on 2 April, which aims to rewrite the rules of the global financial system.
"There is a need for a global new deal so that the world economy can recover" said Mr Brown to ensure an economy that is based on the "soundest principles".
Leaders said there was a need for international institutions, including the International Monetary Fund, to play a greater role not just to help countries in financial trouble but to prevent countries from getting into such difficulties.
Mr Brown said leaders had agreed that that the IMF needed access to at least $500bn (£348bn).
“ We all agreed that we can no longer tolerate the reward package system for traders and bankers ”
French President Nicolas Sarkozy
The comments in Berlin come amid ongoing volatility in world financial markets and uncertainty over the future of some of the world's key banks.
Ms Merkel said: "We are making a commitment that all financial markets, products, and participants - including hedge funds and rating agencies - are of course subject to supervision and regulation."
Details on such a plan need to be worked out before the meeting in London, she added.
Hedge funds, which typically attract wealthy private investors, have been criticised for their lack of transparency and oversight.
As well as greater supervision of all financial markets and instruments, leaders underlined the need to reassess the issue of pay at finance firms.
French President Nicolas Sarkozy added: "We all agreed that we can no longer tolerate the reward package system for traders and bankers."
There has been much criticism of bankers' bonuses, which have been high despite their bank's poor performance.
Leaders also said they wanted to crack down on tax havens.
Ms Merkel said: "As far as unco-operative players, tax havens or areas where non-transparent business is carried out are concerned, we need to develop sanction mechanisms. These must be made very concrete," she said
She added that a list would be drawn up "clearly showing which the unco-operative jurisdictions are."
French, Italian, Spanish, Dutch, UK and German leaders are hoping to take a common approach at the London summit .
But analysts say reaching agreement among EU powers will not be easy.
The current Czech presidency of the EU, as well as and the European Commission, have voiced concern at attempts by France, Italy and Spain to shelter their car industries from the effects of the downturn.
“ Capitalism must be given new moral foundations ”
The BBC's Rob Cameron in Berlin says Czech Prime Minister Mirek Topolanek - who is also in Berlin - will have a private meeting with French President Nicholas Sarkozy, following a very public row between the two countries.
Mr Sarkozy has suggested that in order to secure government aid, French carmakers should move production out of their East European factories and back to France.
Such disagreements are threatening to prevent Europe speaking with one voice, our correspondent adds.
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Published: 2009/02/22 16:26:43 GMT