By Anna Willard and Jean-Baptise Vey

PARIS (Reuters) - French President Nicolas Sarkozy said on Thursday the "law of the jungle" should not be allowed to rule financial markets and urged better regulation and transparency.

His Economy Minister Christine Lagarde told reporters Group of Seven finance ministers could meet before a scheduled October gathering to discuss the situation, but added that she did not think the current upheavals would damage the real economy.

Sarkozy, speaking on vacation in the United States, said he believed the economy, enjoying its best run of growth in decades at global level, could withstand the market turmoil and said governments were not powerless to deal with the crisis.

"It's very important to understand that I am attached to freedom, but freedom does not mean law of the jungle," Sarkozy told RTL radio from Wolfeboro, New Hampshire.

"I am for an economy that makes room for creators and wage earners, not speculators. I think that states are not powerless in the face of this, that explanations should be called for and minimum rules imposed," Sarkozy said.

He said the "moralisation of financial capitalism" he had campaigned for during spring presidential elections in France meant regulation, prudential rules and transparency.

In Italy, Prime Minister Romano Prodi broke into his holiday to tell reporters that interventions by the European Central Bank, which has pumped liquidity into markets, were "in the right direction," adding: "We will wait to see in the next few days if they are sufficient."

Shares slid in Asia, Europe and the United States, and more steeply in emerging markets of Eastern Europe, South Africa and Latin America, while demand for the government bonds of wealthy countries rose at the expense of riskier debt and credit.