Asia, Europe to urge key IMF role in credit crisis

Asian and European leaders called Friday for a coordinated response to the global financial meltdown and prepared to endorse a critical role for the International Monetary Fund in aiding the hardest-hit countries.

Speaking in Beijing on a day when stock markets plunged across Asia, Chinese President Hu Jintao told assembled leaders of 43 nations that the crisis had badly dented China's economic juggernaut.

"The global financial crisis has noticeably increased the uncertainties and factors for instability in Chinas economic development," Hu said in remarks at the opening of the biennial Asia-Europe Meeting, known as ASEM.

China has made "active efforts to the best of its ability" to mitigate the crisis and will work with the international community to revive stability "with a sense of responsibility," Hu said, pledging his government would vigorously expand domestic demand and maintain healthy financial markets.

The two-day ASEM summit seeks to build consensus on how to respond to the crisis ahead of a Nov. 15 meeting of the 20 largest economies in Washington, D.C.

What emerged Friday was strong sentiment i favor of rewriting rules for overseeing the global economy and a leading role for international financial institutions such as the IMF.

A draft of a meeting statement on the crisis seen by The Associated Press called on the IMF and other financial institutions to act immediately to help stabilize strugglig banks and staunch the flood of red ink on regional stock exchanges.

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

If adopted, the statement would be among the strongest calls yet for a leadg role in the crisis for the IMF, long known as the international lender of last resort. Countries as disparate as Hungary, Ukraine, Iceland and Pakistan have already turned to the IMF for help in bridging liquidity crunches.

The draft statement said leaders agreed to "undertake effective and comprehensi reform of the international monetary and financial systems."

"They agreed to quickly take appropriate initiatives in this respect, in consultation with all stakeholders and the relevant international financial institution," it said.

Japanese Prime Minister Taro Aso, leader of the world's second-largest economy, "strongly supports" a critical role for the IMF, Japanese Foreign Ministry spokesman Kazuo Kodama said.

In remarks at the opening ceremony, French President Nicolas Sarkozy called for a united Asia-Europe front at the Washington meeting.

"Europe is going to act in a united way, and we will submit proposals that we have developed together. Europe would like Asia to support our efforts and would like to make sure that on the 15th of November we can face the world together and say that the causes of this unprecedented crisis will never be able to happen again," Sarkozy said.

ASEM has no mandate to issue decisions, and participants differ widely on their views toward international cooperation and intervention by global bodies. Free-trading Singapore and economic powerhouse Germany are attending, along with isolated, impoverished Myanmar and landlocked, authoritarian Laos.

Responses to the crises have varied widely so far. Europe has already approved a plan under which the 15 euro countries and Britain put up a total of 1.7 trillion euros (US$2.3 trillion) in guarantees and emergency aid to help banks.

Asian financial systems are less shaky, having had less direct exposure to the toxic sub-prime mortgages that are wreaking havoc on U.S. and European markets. Showing a notable lack of urgency, South Korea, China, Japan and the 10-country Association of Southeast Asian Nations recommitted themselves to an US$80 billion emergency fund to help those facing liquidity problems - to be established by next June.

China and other Asian economies are, however, expected to take a major hit from a drop in exports and foreign investment. Even before the crisis hit last month, China's economy was beginning to slow. Growth in the third quarter slowed to 9 percent, which, although the fastest among the largest economies, was down from 11.9 percent for all of 2007. The World Bank says a further retreat is expected next year.

The crisis has again raised the threat of economic nationalism, and in remarks to the assembly, EU Commission President Jose Barroso warned countries against resorting to protectionism and isolation.

"Just as we should strive for open societies, governed by the rule of law, so we must work to have open markets, but markets with rules," Barroso said.