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EU to press for reform, Asia joins bailout

BRUSSELS/LONDON - European leaders pressed on Wednesday for an overhaul of global financial structures after Asia joined western bastions of capitalism in bailing out banks to avert financial meltdown and tackle looming recession.

EU leaders arrived in Brussels after committing 2.2 trillion euros ($3.02 trillion) to rescue European banks and break a logjam in money markets that has choked off lending in the worst financial crisis since the Great Depression.

Washington followed with similarly radical state action to stem a crisis which began with a US housing market collapse and now threatens economies worldwide. The ructions of recent weeks have exposed glaring shortcomings in international financial structures developed after World War Two.

‘The IMF has got to be rebuilt as fit for purpose ... We need an early warning system for the global economy,’ British Prime Minister Gordon Brown told reporters in Brussels.

German Chancellor Angela Merkel also told her parliament new international financial rules were needed with the International Monetary Fund taking on a bigger supervisory role.

The United States put its shoulder to the wheel on Tuesday by offering to take $250 billion worth of stakes in its banks, an astonishing move in the home of free market capitalism which suggests an appetite for new regulation even there, with a US presidential election less than three weeks away.

The damage is not over. US bank JPMorgan Chase's third-quarter profit plunged 84 percent.

Southeast Asian nations, backed by $10 billion from the World Bank, were the latest to join the rescue effort, agreeing to create a multi-billion fund to help banks.

The fund will buy up toxic debts and support banks in the region, Philippines President Gloria Macapagal Arroyo said.

RECESSION THREAT

Even if a banking sector collapse has been averted, a recession has not, a fact markets seized upon.

European shares shed 2.6 percent while US stock futures pared losses after JP Morgan and Coca-Cola results.

Coca-Cola reported an above-forecast quarterly profit as strong international demand offset falling volume at home.

Iceland, driven close to bankruptcy as frozen credit markets caused its banks to fail, cut interest rates by a staggering 3.5 percentage points as its officials pursued efforts to get help from Russia via a multi-billion-euro loan.

British unemployment posted its biggest rise in 17 years in the three months to August as the jobless rate rose to 5.7 percent.