WASHINGTON: Leaders from the world's biggest economic powers grappled on Friday with how to restore lasting stability to the shell-shocked international financial system as a crisis summit in Washington got underway.

Opening the summit with a toast, US President George W. Bush hosted more than 20 leaders from the world's richest nations and emerging economic powerhouses at a working dinner at the White House, to be followed by formal talks on Saturday.

"This problem did not develop overnight and it will not be solved overnight, but with continued cooperation and determination it will be solved," Bush told fellow leaders.

Though the US leader faces mounting calls from Europe, Russia and other emerging nations to increase financial market control, Bush's term ends on January 20 and he cannot make firm commitments for president-elect Barack Obama.

While Obama himself was not attending the summit, former secretary of state Madeleine Albright and an ex-Republican lawmaker were using the opportunity to pursue contacts on his behalf with foreign leaders, finance ministers and top bureaucrats.

Bush used the opportunity of the opening of the summit to renew his defence of free and open markets.

"Free market capitalism has been an engine of prosperity, progress, and social mobility in economies all over the globe," he said.

"All our nations must reject calls for protectionism, collectivism, and defeatism in the face of our current challenge."

The summit, billed as a first in a series, comes amid growing evidence that the worst international financial crisis in generations is taking a heavy toll on economies around the world, with EU data on Friday showing the 15-nation eurozone officially in recession.

While the crisis began in the US housing market, it has triggered plunges in global stock markets and mass lay-offs as the financial sector struggles to stay afloat, swamped with sub-prime mortgages turned sour.

"There is more work to do beyond the immediate crisis, and the stakes are indeed high," Bush said. "Billions of hardworking people are counting on us to strengthen our financial systems for the long term."

The US leader said that the summit would seek to understand the roots of the crisis, review the responses to it, outline how to reform the financial system and launch a plan to bring about changes.

Bush has said he wants the summit to focus on issues ranging from improving bank risk management practices, improving accounting rules for securities so that their "true value" is clear, and harmonizing accounting laws among nations.

"All the countries accept the necessity of regulation of the financial system," Brazilian Finance Minister Guido Mantega told reporters before the summit opened. "There could be divergence about the type of regulation.

Japanese Prime Minister Taro Aso will remind fellow leaders that a key lesson learned from Japan's financial crisis in the 1990s was the need for swift action to address banks' non-performing loans problem, a Japanese official said.

"The first priority is the full disclosure of NPLs and the removal of those troubled assets from their balance sheets," Japanese foreign ministry spokesman Kazuo Kodama told reporters in Washington ahead of the talks.

Created in 1999, the Group of 20 (G20) countries account for 85 percent of the world economy and about two-thirds of its population.

Its members are the United States, Germany, Japan, France, Italy, Britain and Canada, the European Union, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. Spain and the Netherlands have also been invited.

Brazilian Foreign Minister Celso Amorim told journalists in Washington that it was "natural" that the next meeting of G20 leaders, due in late February or early March, would be held in Britain, which would hold the rotating presidency of the group then.


- AFP/so