From left, Luxembourg Prime Minister Jean Claude Juncker, Italian Prime Minister Silvio Berlusconi, German Chancellor Angela Merkel, French President Nicolas Sarkozy, British Prime Minister Gordon Brown, European Commission President Jose Manuel Barroso and European Central Bank President Jean Claude Trichet at an emergency financial summit in Paris, Saturday. (Virginia Mayo/Associated Press)

Leaders from Europe's four economic powerhouses are calling on the EU to allow them greater freedom to respond to the global financial crisis, vowing Saturday to support their countries' banks in a bid to calm shaky markets and investors.

Heads of state from France, Italy, Britain and Germany held emergency talks in Paris to discuss strategies to restore stability to the global economy. They fell short, however, of drawing up a joint bailout plan for Europe's ailing financial institutions, suggesting there were conflicting visions on how to handle the crisis.

While the European leaders promised to take "all necessary measures" to ensure the soundness and stability of the banking and financial system, they provided few specifics at the end of the emergency summit.

"We want to put down the foundations of a capitalism of the entrepreneur and not of the speculator," French President Nicholas Sarkozy said.

"We want transparency; we want moralization. We want the creation of value. We want people to have confidence."

The talks were attended by German Chancellor Angela Merkel, Italian Premier Silvio Berlusconi and British leader Gordon Brown, as well as European Commission President Jose Manuel Barroso, European Central Bank President Jean-Claude Trichet and top economic official Jean-Claude Juncker.

The group called on European Union regulators to move swiftly and flexibly to approve government bailouts for banks, while demanding increased power to negotiate EU economy rules in order to respond to the crisis.

The Paris summit came a day after the United States Congress approved a $700-billion US government bailout of the battered financial industry, which President George W. Bush quickly signed into law.

European governments forced to bail out banks

Although Europe has tighter banking rules than the U.S. meaning fewer defaults on loans, European banks have invested heavily in American institutions.

Those investments are now effectively worthless, leaving some banks short of funds to meet demand. European governments have been forced to step in and bail out several major banks recently, including Britain's Bradford & Bingley, Belgian-Dutch Fortis and Belgium's Dexia.

Sarkozy invited leaders to the summit amid growing signs that the financial crisis, fuelled by the credit freeze that began in the U.S., is amplifying an economic slowdown across Europe.

British Prime Minister Gordon Brown called on his European counterparts to send a message that "no sound, solvent bank should be allowed to fail through lack of liquidity."

Banking executives should be held responsible if their businesses fail and should steer clear of massive reward schemes, the leaders said, but they did not say what types of punishments they would seek for failed or risk-taking executives.

"We also agreed to do far more to clean up the system where there has been irresponsibility, and we agreed today that we will set up a college of regulators," Brown said at the end of the talks.

Heading into the meeting, some of the leaders balked at a proposal from the Netherlands to create a $415-billion US (€300-billion) European Union fund to help failing banks. Germany and Britain were said to be against the idea, while Italy refused to either reject or support it.

France initially expressed interest in debating a single rescue plan, but later backed off.

Piecemeal approach best: expert

By the summit's end, the leaders agreed to expedite a $41.5 billion US package to help free up lending for small- and medium-sized businesses.

Bertrand Jacquillat, a professor of economics in Paris, said a pan-European bailout fund would be too cumbersome to manage and he favours a piecemeal approach.

"I think that type of activity is much more efficient than taking the time to set up a super fund or regional fund with all the rules to establish," he said.

The creation of such a fund would require agreement from the EU's 27 member states.

Global leaders should meet "as soon as possible" to start overhauling the banking sector, the group also said following Saturday's meeting.

Ireland last week became the first country in western Europe to slip into recession amid the economic turmoil, official figures showed. Economists believe Germany, Spain and Britain may be next.

Last week, Sarkozy said his country was in recession.

On Friday, the French national statistics agency said it expects the economy will shrink by 0.1 per cent in both the third and fourth quarters of 2008, following a 0.3 per cent contraction in the second quarter.

French Prime Minister François Fillon said at the time that the world is on the “edge of the abyss" because of an "irresponsible" banking system.

The United Nations General Assembly also weighed in on the crisis at the close of a week of high-level talks, held annually in New York.

"Unrestrained worship of the market" is to blame for the financial meltdown spreading across the globe, General Assembly President Miguel D’Escoto said in a statement issued Friday.

“We are reaping the consequences of the idolatry,” D’Escoto told reporters later in the day, warning of the pitfalls of putting blind trust in the market.

He called for greater regulation to help reverse the global economic slide, as well as greater solidarity between individuals and governments.

With files from the Associated Press