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Asia, Europe reach consensus on financial crisis

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[October 25, 2008]  BEIJING (AP) -- Asian and European leaders said Saturday they have reached a broad consensus on ways to deal with the global financial meltdown and will present their views at a crisis summit next month in Washington.

Speaking at the close of a two-day Asia-Europe Meeting in China's capital, the leaders called for new rules for guiding the global economy and a leading role for the International Monetary Fund in aiding crisis-stricken countries.

InsuranceThe biennial forum, known as ASEM, generally does not make decisions, and a statement issued by the leaders indicated how much the crisis in global markets has driven world opinion and institutions.

"I'm pleased to confirm a shared determination and commitment of Europe and Asia to work together," EU Commission President Jose Barroso said at a closing news conference.

He said participants would use the statement as the basis of their approach at the Nov. 15 Washington summit of the 20 largest economies.

Although short on details, the statement, adopted Friday, calls on the IMF and similar institutions to help stabilize struggling banks and shore up flagging share prices.

"Leaders agreed that the IMF should play a critical role in assisting countries seriously affected by the crisis, upon their request," it said.

Participants also agreed to "undertake effective and comprehensive reform of the international monetary and financial systems," the statement said.


The document is one of the strongest endorsements yet for a leading role in the crisis for the Washington-based IMF, long known as the international lender of last resort.

Responses to the crisis among participants have been varied thus far. The 15 euro countries and Britain reacted in dramatic fashion, agreeing to put up a total of US$2.3 trillion in guarantees and emergency aid to help banks. In contrast, South Korea, China, Japan and the 10-country Association of Southeast Asian Nations have merely recommitted themselves to an US$80 billion emergency fund to help those facing liquidity problems - to be established by next June - even while their stock markets tumble and export markets dry up.

Speaking for the hosts, Chinese Premier Wen Jiabao said financial innovation needed to be balanced with regulation, and called for measures to reduce the impact of the meltdown on jobs, growth and trade.

"We need to use every means to prevent the financial crisis from having an impact on the growth of the real economy," Wen said.

He said that the direct impact of the crisis on China had been relatively light, but the accompanying slowdown in the world economy and export demand would "inevitably have an impact on China's economy."

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China will seek to do its part by maintaining "fairly fast and stable economic growth," Wen said. Although growth in the third quarter slowed to 9 percent - down from 11.9 percent for all of 2007 - China's economy continues to grow at the fastest rate among the largest economies.

French President Nicolas Sarkozy said the Beijing summit had raised expectations for solid results when the leaders meet in Washington.

"They have all expressed their willingness for the Washington summit to be a place where we make some decisions, and we have all understood that it would not be possible to simply meet and have a discussion, we need to turn it into a decision-making forum," Sarkozy said.

German Chancellor Angela Merkel called for the IMF to become a "guard for the stability of the international finance system," and said there was unanimous agreement that it needed to take on a supervisory role.

She also called for the step-by-step integration of the IMF into the Financial Stability Forum, founded in 1999 by the Group of Seven leading industrialized countries and aimed at bolstering the international financial system.

The IMF, whose loans normally include strict provisions, is discussing loan packages with close to a dozen countries from Iceland to Pakistan, and is examining ways to speed up the process.


Associated Press writers Henry Sanderson in Beijing and Kwang-tae Kim in Seoul, South Korea, and researcher Bonnie Cao in Beijing contributed to this report.

[Associated Press; By CHRISTOPHER BODEEN]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.



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