British Prime Minister Gordon Brown called for more rigorous supervision of the global banking system on Saturday, a day before EU leaders meet to thrash out ways to tackle the financial crisis.
German Chancellor Angela Merkel urged European Union states to work together to deal with the downturn, telling the Hamburger Abendblatt newspaper: We are working intensively on new rules for the international financial markets.
Brown, speaking at his ruling Labour Party's National Policy Forum, called for the global mandate of international institutions to be beefed up to deliver growth and jobs.
I want us to do what was advocated by our country years ago. To have global supervision of what is a shadow global system. I want there to be no hiding place for special investment vehicles, for hedge funds or tax havens, he said.
Because this is a worldwide problem of banking failures we are now looking with our other colleagues internationally at how across all parts of the world we can bring under supervision what is an international shadow banking system. Brown had tough words for the bankers whose dodgy lending practices and bonus culture brought the international financial system to the brink of collapse.
Some practices are indefensible and they have got to be cleaned up now. It's time to set new rules for the banks of all countries, he said.
Brown said the government was exploring legal avenues to recover some of the payouts given to bank executives who quit their jobs when their institutions were bailed out with state funds last year.
In Germany, Europe's biggest economy which is facing its worst recession since World War Two, Merkel has long called for tighter supervision of financial markets.
We need a global financial architecture that is transparent. The origin and value of certificates, derivatives and other securities have to be traceable, she said.
Sunday's EU summit will try to overcome differences on how to tackle the financial crisis that has placed the euro under unprecedented strain. However, no major decisions are expected.
The crisis has highlighted fundamental differences between economies in the eurozone with some countries, such as Ireland, seeing their deficits balloon.
Ireland's Finance Minister Brian Lenihan said on Saturday the country would take further measures to shore up its banking sector and executives would see their pay capped.
Leaders of the 10-member ASEAN (South East Asian Nations), meeting in Thailand, vowed to work with the G20 developed and developing nations on reforming global financial institutions.
Britain will host a meeting of G20 leaders on April 2.
ASEAN leaders have agreed to ease monetary policy and resist protectionism as the financial crisis batters their export-dependent economies, according to a draft statement to be issued at their summit on Sunday.
Critics argue while ASEAN leaders have argued against protectionism in world trade, they have defended their own buy-local campaigns saying they are consistent with trade rules.
In the European Union, core values such as a commitment to open markets and help for poorer member states risk losing out to pressure on governments to protect their national industries.
With President Barack Obama bracing the U.S. budget for more spending to halt the downturn, leaders such as France's Nicolas Sarkozy have said Europe should be ready to follow suit.
If the United States defends its industry ... maybe in Europe we can do the same, he said this week.
Sarkozy has come under fire since France proposed a 6 billion euro ($7.61 billion) state loan for carmakers Renault and Peugot-Citroen in return for what has been characterized as an unwritten pledge not to close facilities in France during the loan period.
But the European Commission, which monitors state aid rules in the EU, said on Saturday it was satisfied with guarantees set out by France and that the plan did not amount to protectionism.
Popular anger at rising unemployment has led to protests and riots across Europe. Latvia's government collapsed last week after a wave of protests. Greece, Bulgaria and Lithuania have witnessed riots.