China and EU pledge to fight financial crisis

By Gabriela Baczynska and Gernot Heller

BEIJING (Reuters) - Even as markets tumbled around them, Asian and European leaders expressed confidence on Friday that they could overcome the deepest global financial crisis in more than 70 years.

Opening a two-day Asia-Europe Meeting (ASEM) of 27 EU member states and 16 Asian countries, President Hu Jintao urged a rapid response to the turmoil, which he said increased the challenges confronting the world's fourth-largest economy.

"For China's economy to maintain a healthy state is itself an important contribution to global financial stability and economic development," Hu said.

Chinese Premier Wen Jiabao said the crisis was generating "a severe shock to global economic growth."

The European Union wants Asia to play a full part at a crisis summit that U.S. President George W. Bush is convening next month to help shape global financial reforms and tackle the economic imbalances at the root of the crisis.

German Chancellor Angela Merkel said reforms should focus on more transparency in markets, new compensation schemes for financial institutions, stricter supervision and closer international cooperation.

"This is about no less and no more than the creation of a new financial constitution," she said.

Merkel said it was too early to say how long the crisis would last. As if to reinforce the point, financial markets went into fresh convulsions on Friday.