Europe wins backing for finance revamp

By Francois Murphy and Darren Ennis

BRUSSELS (Reuters) - Europe won backing from the United States, Russia and Japan on Wednesday for a summit on urgent reforms to the world financial order to help prevent a repeat of the worst credit crisis since the Great Depression.

But despite the apparent willingness of authorities to take further action, markets slumped as fears of recession took hold and wiped out optimism this week that massive state rescues for Western banks had seen off the worse of the lending crunch.

France, Germany and Britain called for leaders of the Group of Eight (G8) industrialised countries to gather next month with the heads of emerging economies to look at a radical overhaul of the world's 60-year-old financial architecture.

"A new form of capitalism is needed, based on values which put finance at the service of business and citizens, and not vice versa," French President Nicolas Sarkozy told other EU leaders at the start of a two-day summit in Brussels.

"The system must be completely overhauled, an overhaul that must be global," Sarkozy told other EU leaders, according to a text of his speech distributed to reporters.

Prime Minister Gordon Brown joined his call for a summit and urged a rebuilding of the International Monetary Fund (IMF) as the keystone of global market regulation. Germany also backed the idea and Italy insisted the reforms must be bold.

"Today the dollar is the currency of Bretton Woods, but now it could be that there will be other combinations. The debate on foreign exchange is being reopened," Economy Minister Giulio Tremonti said.

Sarkozy said the meeting to review of the institutions such as the IMF and World Bank brought into being by the 1944 Bretton Woods conference should ideally take place in New York.