BEIJING, Oct 25: World leaders vowed on Saturday to overhaul the global financial system in the face of recession fears, but US President George W. Bush urged nations to “recommit” to free markets despite economic turmoil.

After a week of growing economic gloom and plunging stock markets, Asian and European leaders meeting in Beijing promised wide-ranging reforms while UN Secretary General Ban Ki-moon also called for quick change.

“Leaders pledged to undertake effective and comprehensive reform of the international monetary and financial systems,” the 40-member Asia Europe Meeting (ASEM) said in a statement released late on Friday.

“They agreed to take quickly appropriate initiatives in this respect, in consultation with all stakeholders and the relevant international financial institutions.”

China’s Premier Wen Jiabao called for more regulation of the world’s financial system, saying after the summit “we need to draw lessons from this crisis”. “We need financial innovation to serve the economy better, however we need even more financial regulation to ensure financial safety.”

Wen confirmed China’s participation in a crucial summit in the United States on November 15 aimed at tackling the financial meltdown, without specifying which Chinese leader would attend the meeting of 20 industrialised and emerging powers.

The economic turmoil has led to growing criticism of US-style free market capitalism, with French President Nicolas Sarkozy earlier this week saying “the ideology of the dictatorship of the market... is dead.”

But Bush on Saturday, moving to set an agenda for the upcoming international economic summit, said its participants must “recommit” to the principles of free enterprise and free trade.

“As we focus on responses to our short-term challenges, our nations must also recommit to the fundamentals of long-term economic growth --- free markets, free enterprise, and free trade,” Bush said in his weekly radio address.

The US president, who leaves office in January, added that “open market policies had lifted standards of living and helped millions of people around the world escape the grip of poverty.”

Ban said the Washington meeting must address the need for change and joined chief executives of key UN institutions in calling for considered but large-scale reforms. “The market and regulatory failures that have led to this crisis must be addressed as a matter of urgency,” a joint statement said.

“We reaffirm the need for meaningful, comprehensive and well-coordinated reform of the international financial system and pledge our support to this end.”

Stock markets provided a grim backdrop to the Beijing meeting, plummeting on Friday after a raft of pessimistic corporate and economic news. Tokyo’s dizzying 9.6 per cent slump spilt over into Europe, where London’s FTSE plunged 5.0 per cent.

The Dow Jones Industrial Average slid 312.30 points (3.59 per cent) to close at 8,378.95, capping a week when the US blue-chip index dropped more than 5 per cent.

The Saudi stock market, the largest in the Arab world, began its trading week on Saturday with a 9 per cent plunge to sink to its lowest point in four years.

Giants of the auto, airline and technology industries took emergency action.

France’s PSA Peugeot-Citroen and Renault ordered huge production cuts, while Japan’s electronics giant Sony Corp. and Europe’s biggest airline Air France-KLM issued profits warnings.

Chrysler LLC, the number three US automaker, said it would cut up to 5,000 white-collar jobs by the end of the year as prospects in the sector grow dimmer.

New figures showed industrial confidence in both France and Italy had fallen to the lowest level since 1993. In Spain, the unemployment rate jumped to 11.33 per cent --- the highest in more than four years.

Britain’s economy shrank by 0.5 per cent in the three months to September compared with the previous quarter, official figures showed, marking the first contraction since 1992.---AFP