Asia and Europe close ranks on crisis

By Alan Wheatley and Elizabeth Piper

BEIJING/LONDON (Reuters) - Asian and European leaders closed ranks on Saturday to try to bolster confidence among investors who fear that a global credit crunch has ushered in a deep and damaging world recession.

The worst financial crisis in 80 years has forced countries to work together to find ways to help shore up a financial system crippled by banks fearful of lending to each other.

But with evidence mounting that Europe is already in recession, analysts fear that cooperation in shoring up banking systems could be threatened as governments begin to turn their attention to reviving domestic demand.

"We must use every means to prevent the financial crisis impacting growth of the real economy," Chinese Prime Minister Wen Jiabao said at the end of a two-day summit of 43 Asian and European leaders in Beijing.

Governments have pledged around $4 trillion (2.51 trillion pounds) to support banks and restart money markets to try to stem the crisis and are considering tougher financial rules to guard against any repeat.

Wen said countries needed to strike a balance between innovation and regulation and between savings and consumption.

"We need financial innovation, but we need financial oversight even more," he said, adding that China's priority was to spur domestic demand to ensure the country maintained fairly fast, steady growth.

U.S. President George W. Bush, who will host a global summit on the financial crisis next month, said in a radio address on Saturday: "While the specific solutions pursued by every country may not be the same, agreeing on a common set of principles will be an essential step towards preventing similar crises in the future."