European Union leaders were due to wrap up a two-day summit on Thursday, Oct. 16, while facing the worst financial crisis since the Great Depression. Many analysts consider a US recession unavoidable.

In early trading on Thursday main European stock markets were down sharply, with London and Frankfurt opening five percent lower.

After their first day of meetings in Brussels, EU heads of state and government called for a common European response to the global credit crunch.

"After a few false starts, Europe has shown that it is capable of acting," Austrian Chancellor Alfred Gusenbauer said Wednesday.

British Prime Minister Gordon Brown joined French President Nicolas Sarkozy and German Chancellor Angela Merkel in calling for better regulation of global financial markets.

"We urgently need what you might call the 'new Bretton Woods,' so that we can restore confidence in the system while dealing with the areas that have been exposed in recent weeks," Brown said before the summit began, referring to the international financial system set up in 1944 that created the World Bank and International Monetary Fund.

Centralized supervision

Brown's proposals included placing the world's top companies, including "some of the biggest financial institutions," under international supervision, and the creation of "an early warning system" designed to prevent future financial crises from spreading.

"Instead of having national supervisors, we need a global way of supervising our financial system," Brown said in his appeal for a global summit to discuss market reforms as well as improved transparency and international coordination.

Sarkozy was the first European leader to call for a major restructuring of the existing financial system's rules and the relationships among the world's major industrial states.

"The system must be completely overhauled, an overhaul that must be global," Sarkozy said.

Comprehensive, coordinated reforms

At their summit, EU leaders were set to rubber-stamp a 2-trillion-euro ($2.7 trillion) financial rescue plan inspired by Britain and approved by eurozone leaders on Sunday. The plan includes measures to guarantee interbank lending and to nationalize parts of the shaky financial institutions by providing them with liquidity in exchange for shares.

"The European Council reaffirms its determination to act in a comprehensive and coordinated manner to restore the good functioning of the financial system," leaders were set to announce, according to a draft statement seen by the German dpa news agency.

In order to make European leaders also called for a meeting of the Group of Eight highly industrialized nations to be held before the end of the year to revamp international finance structures.

G8 members to convene

The G8 members, the United States, Japan, Canada, Russia, Great Britain, France, Germany and Italy, said they were united in their pledge to strengthen financial instutitions and restore investors' confidence in markets.

"While our focus now is on the immediate task of stabilizing markets and restoring confidence, changes to the regulatory and institutional regimes for the world's financial sectors are needed to remedy deficiencies exposed by the current crisis," the group said in a statement released Wednesday in Washington.

The group of wealthy nations also said they would hold a leaders meeting with key countries "at an appropriate time in the near future to adopt an agenda for reforms."

A solid backer of the idea, Merkel said the G8's meeting should be held before the end of 2008 and include heads of state from emerging nations.