Europe, Asia pledge major reform of global financial system

European and Asian leaders pledged at a summit here Friday to comprehensively and quickly reform the global financial system, as they vowed united action in tackling the unprecedented economic challenges.

The more than 40 leaders spent the first day of the Asia Europe Meeting (ASEM) in talks on how to end the worst financial turmoil since the Great Depression of the 1930s, as stock markets around the world once again tumbled.

“Leaders pledged to undertake effective and comprehensive reform of the international monetary and financial systems,” said a statement posted by host China on the ASEM website’s home page at the end of the day’s meetings.

“They agreed to take quickly appropriate initiatives in this respect, in consultation with all stakeholders and the relevant international financial institutions.”

While no specifics were given, the leaders said supervision and regulation of all those involved in the financial system needed to be stepped up.

And they called for the International Monetary Fund to play a “crucial” role in helping countries most in trouble.

Before the meeting began, China, South Korea, Japan and 10 Southeast Asian Nations also pledged to create an 80-billion-dollar fund that those countries could draw upon to fight off currency speculators.

The announcement of the Asian fund, which had been in the pipeline for months, was the first major co-ordinated action by Asian countries in tackling the financial crisis since the worst of the turmoil began last month.

At the opening of the two-day ASEM gathering, Chinese Premier Wen Jiabao made it clear Asia had heard the repeated calls in recent days from Europe for the two regions to work together.

“Overcoming the crisis requires global action and a joint response,” Wen told the leaders.

“Asia and Europe are important forces in maintaining financial stability and promoting economic growth. We should join hands to show the world our confidence.”

China's Hu JintaoIn his opening remarks to the summit, French President Nicolas Sarkozy called on Asia to support Europe at a crucial economic meeting next month in the United States where leaders will discuss ways to end the turmoil.

“When it comes to the Washington summit on November 15, Europe is going to present a united front and we will submit well-considered proposals developed together,” Sarkozy said.

“Europe would like Asia to support that effort, so that together on November 15 we can tell the whole world that the causes of this unprecedented crisis will never happen again.”

Sarkozy, whose country currently holds the rotating presidency of the European Union, is seeking to overhaul the Bretton Woods system that has governed international finance since the end of World War II.

But the United States has been more cautious in its approach, stressing the importance of preserving the commitment to free markets, free enterprise and free trade.

The statement released by China at the end of Friday’s talks backed the Washington summit, but gave no specifics on whether Asia would side with Europe on all issues.

“Leaders supported the convening of an international summit… to address the current crisis and principles of reform of the international financial system as well as long-term stability and development of the world economy,” it said.

The most concrete development of the day — the 80-billion-dollar Asian war chest — aims to save those nations’ currencies if need be, allowing them to dip into the pool of funds to fend off speculators.

“We plan with our East Asia dialogue partners to launch (the fund) as soon as possible,” said Sultan Hassanal Bolkiah, leader of ASEAN member Brunei.

The fund would be created by the end of June next year, and be accompanied by an independent regional financial market surveillance organisation, according to South Korean President Lee Myung-Bak’s spokesman.

However, no other party involved gave a firm timeline for when the fund would definitely be created.