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WASHINGTON: World leaders lined up a series of summits on reforming global finance as South Korea on Sunday became the latest country to shore up troubled banks.
The summits, announced following talks between US President George W. Bush and French President Nicolas Sarkozy, are the latest fruit of efforts to coordinate an international response to the crisis.
But there were already signs of rival visions for the summits, with European leaders pushing for a radical overhaul of the global financial architecture while Bush said the foundations must be preserved.
"As we make the regulatory and institutional changes necessary to avoid a repeat of this crisis," Bush told Sarkozy and EU commision chief Jose Manuel Barroso in the talks on Saturday. "It is essential that we preserve the foundations of democratic capitalism - the commitment to free markets, free enterprise and free trade.
"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."
The tone of Bush's remarks after the talks at his Camp David retreat in Maryland was markedly different from those from Sarkozy who has been urging a broad overhaul of the so-called Bretton Woods system of international finance and commerce put in place during World War II.
"We must avoid at all costs that those who have led us to where we are today should be allowed to do so once again," said Sarkozy.
Sarkozy, who has been a vocal advocate of fundamental financial reforms, stressed it was urgent to "stabilise the marketplace as swiftly as possible by coming up with answers."
"Once calm has been restored, we must avoid at all costs that those who have led us to where we are today should be allowed to do so once again."
Although no date has yet been set, the first of the summits will likely be held next month, after the presidential election on November 4, White House spokesman Tony Fratto said.
Critics say the institutions sketched out after the Great Depression - the World Bank and International Monetary Fund - are ill-equipped to deal with the globalised economy and the complexities of modern finance.
The calls for fundamental reforms by Sarkozy, current head of the EU, received backing from Spain's Prime Minister Jose Luis Rodriguez Zapatero.
"There has to be a stricter regulation and international supervision, at least at the level of the European Union," the Socialist leader was quoted as saying in the newspaper Publico.
The crisis erupted over the collapse of the market in high-risk sub-prime US home loans last year. The loans, repackaged as derivatives, were resold to investors and banks around the world.
Widespread defaults set off a chain reaction through the financial system, eventually leaving banks short of cash and hesitant to make the interbank loans essential to the system's smooth functioning.
Nations across the globe have taken emergency steps to rescue banks and restore confidence and South Korea on Sunday offered up to 100 billion dollars in guarantees for bank borrowing in foreign currencies and put a 30 billion dollar injection into the bank system.
"We have to do our best to tide over the financial crisis and stop an economic slump," Prime Minister Han Seung-Soo said.
The crisis has been compounded by an economic slowdown and fears of recession - broadly defined as when economies are in a decline for two consecutive quarters.
With figures expected to show later this week that Britain is on the brink of recession, its finance minister said he planned to boost public spending.
"You will see us switching our spending priorities to areas which make a difference," Alistair Darling told the Sunday Telegraph. "This is a time when you have to support the economy."
While there was no trading in the major markets on Sunday, stock markets in the Gulf oil states ended mixed as investors appeared to be taking a wait and see approach. The Saudi stock market is the largest in the region and its Tadawul All-Shares Index (TASI) fell 3.8 percent. - AFP/de
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