Bush sets financial summit, more to come
WASHINGTON (Reuters) - President George W. Bush announced on Saturday he would host the first in a proposed series of global summits on the financial crisis as the world grapples with the biggest economic debacle since the Great Depression.
"It is essential that we work together because we are in this crisis together," Bush said before a meeting at the Camp David presidential retreat with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso.
A joint statement after the meeting said the first summit would take place in the United States soon after the November 4 U.S. presidential election and focus on the "principles of reform" needed to fix the world's financial system.
"Later summits would be designed to implement agreement on specific steps to be taken to meet those principles," the statement said, adding that other world leaders would be contacted beginning next week.
The U.S. and European leaders decided it would be too ambitious to handle all the issues in one summit, White House spokesman Tony Fratto said.
Sarkozy has called for a revamp of the international financial architecture established after World War Two at the 1944 Bretton Woods conference -- a massive overhaul that may not win unqualified support in the Bush administration.
The summit plan emerged as fears of a full-blown global recession gathered.
Both U.S. consumer confidence and new-home construction showed sharp drops, and stock markets around the world remain volatile as investors count their losses and ponder when the financial gloom may ease.
Despite the uncertainty, European shares ended higher on Friday. The U.S. Dow Jones Industrial average ended 127 points down on Friday, but was still up 4.75 percent on the week.
Another glimmer of light appeared as interbank lending rates fell this week for the first time since July, providing some hope that the worldwide credit drought may be easing.
But the overall picture continued to look grim. Financial institutions worked to help crisis-hit countries, with Ukraine saying it may receive up to $14 billion from the International Monetary Fund to stabilize its economy.
The IMF, meanwhile, said it was investigating whether its chief, Dominique Strauss-Kahn, abused his power in an affair with a subordinate who has since left the institution -- an embarrassing distraction as global leaders review the role of the IMF and other international financial institutions.
AN OPPORTUNITY
Sarkozy, whose country now holds the rotating presidency of the European Union, said the summit would provide an opportunity to reassess the entire global financial system.
"It would be wrong to challenge the foundations of market economics. But we cannot continue along the same lines because the same problems will trigger the same disasters," he said on Saturday.
The French leader has advocated a new form of "regulated capitalism" and last week suggested that one step could be a review of the relationships between major world currencies such as the euro and the U.S. dollar.
British Prime Minister Gordon Brown has also advocated reforms including a regulatory forum to monitor risks in the financial system, tough new disclosure and due diligence rules and guidelines on executive pay.
Bush leaves office in January and a White House spokesman said he did not know whether the newly elected U.S. president, either Democrat Barack Obama or Republican John McCain, would be invited to attend the first summit.
Bush stressed on Saturday that the basic principles of democratic capitalism -- free markets, free trade and free enterprise -- must be respected.
"We must resist the dangerous temptation of economic isolationism (and) continue the policies of open markets that have lifted standards of living and helped millions of people escape poverty around the world," Bush said.
He had earlier used his weekly radio address to assure Americans that the U.S. government's plan to inject $250 billion in capital directly into U.S. banks did not presage a new era of government interference with the private sector.
Bush said both developed and developing nations would be represented at the summit.
"For this meeting to be a success we must have ideas from around the world," he said.
PAINFUL SQUEEZE
The summit was announced amid as the credit crunch continued to squeeze countries across the globe.
Iceland, pushed close to financial collapse by the bank crisis, faced more uncertainty as Russia indicated it was not yet convinced it should issue it a loan. [ID:nLH574
In Russia, Finance Minister Alexei Kudrin said investors had pulled $33 billion out of the country from August through September.
In the banking sector, which has been at the heart of the crisis, Dutch bank ING, the Netherlands' biggest listed bank, said it expects its first quarterly loss ever, sending its shares to a 13-year low.
A Reuters/University of Michigan survey said U.S. consumer confidence in October suffered its steepest monthly drop since the survey began in 1952. Earlier, a U.S. government report showed construction starts on new homes fell to their slowest pace since January 1991.
"Confidence is collapsing so that's not good even as you have gas prices falling," said Doug Smith, chief economist for the Americas at Standard Chartered in New York. "People are seeing what's happening to their 401ks, stocks and home prices. It's just awful."
(Additional reporting by Tabassum Zakaria at Camp David and Reuters bureau around the globe. Editing by Doina Chiacu)