"The fundamentals of the European economies remain sound," British Prime Minister Gordon Brown said, reading from a statement after talks with his counterparts on Tuesday, Jan. 29.

But he added: "We are calling for greater transparency (to create) better informed markets."

The leaders of Europe's largest economies agreed to remove the "transparency deficit" in the international finance and banking system in the wake of recent market turmoil prompted by the global credit crisis.

The European leaders, joined by European Commission President Jose Manuel Barroso, pledged to an "open global economy" to weather storms on financial markets, which have been complicated by banking crises in France and Britain.

Uncertainty in financial markets-- which triggered an emergency .75 point interest rate cut by the US Federal Reserve last week -- has been compounded by a rogue trader scandal at France's Societe Generale bank and the near collapse of Britain's Northern Rock mortgage lender.

Transparency the first step

"At this time of global uncertainty we need to signal our commitment to an open global economy," Brown added, reading from the joint statement. "Prompt and coordinated action has helped to ease the immediate problems, though there is no room for complacency."

The politicians said greater transparency should be accompanied by an "early warning system" to point to future risks as well as a greater exchange of information within the EU and at the international level.

French President Nicolas Sarkozy said the group agreed that transparent markets, not protectionism, would be most beneficial to the EU.

"We want the markets to be free, we want free and fair competition," he told reporters after the meeting. "What we do not want is a lack of transparency."

Watchdog role for IMF

The big four European leaders said that credit rating systems needed to be improved and that banks needed to report their risk exposure after the US subprime mortgage crisis revealed several financial institutions were more deeply involved with high-risk financial products than first expected.

The International Monetary Fund, which cut its forecast for world growth on Tuesday, should take on a bigger role in watching the global economy, the leaders said.

"The recent market turmoil has ... highlighted the need for reform to ensure that global institutions can meet the challenges of the 21st century," they said in their statement.

Regulation a final option

The group added that if market participants failed to address the issues raised by the recent volatility on world markets then regulatory alternatives would have to be considered.

"The first step is the appeal to market participants to show more transparency and the important message is: if that doesn't happen, then regulation will be needed," German Chancellor Angela Merkel told reporters.

Brown said the European members of the G8 would discuss the measures with G8 partners during talks over the next few weeks and months to start a process that would lead to "significant changes being made" by the end of 2008.

Slighted partners

Current holder of the EU's rotating presidency, Slovenia said the bloc's handling of the financial turmoil should be coordinated by all 27 countries -- not just the four largest economies.

"I believe the discussion and the decisions should be taken within the institutional channels of the European Union," Slovenian Finance Minister Andrej Bajuk said ahead of the meeting.

"I do expect ... that I will receive the proper information from the participants" after the London talks, he added.