By Elizabeth Piper
LONDON (Reuters) - World leaders demanded tougher banking rules on Friday to protect economies from crisis before a meeting of U.S. and French presidents that officials said would explore ways to reform a crumbling financial system.
Not only is the worst financial crisis in 80 years helping push the West into recession, economies in eastern Europe are suffering, turning to foreign lenders to bolster their financial systems, while Asian nations struggle for their own solutions.
Ukraine said the International Monetary Fund was prepared to give it $14 billion in credit, while Hungary slashed its growth forecast after agreeing a 5 billion euro deal with the European Central Bank to keep euros flowing through its banking system.
To prevent any repeat of the crisis, French President Nicolas Sarkozy has said he would raise the prospect of a global summit to deal with regulatory issues at a meeting with U.S. President George W. Bush on Saturday.
He said the summit should make decisions on transparency, global regulatory standards, cross-border supervision and an early warning system.
White House spokeswoman Dana Perino said the meeting between Bush, Sarkozy and European Commission President Jose Manuel Barroso was not connected to the global summit.
But British Prime Minister Gordon Brown said they would discuss "urgent reforms of the international financial system."
He said the post-World War Two financial institutions were out of date.
"They have to be rebuilt for a wholly new era in which there is global, not national, competition and open, not closed, economies," he wrote in the Washington Post newspaper.
Britain's financial watchdog agreed, saying it was time for regulators "to wipe the slate clean."
Adair Turner, chairman of Britain's Financial Services Authority, said the global banking system was past the danger of systemic meltdown although the world faced recession.
"There's no chance of a 1929-1933 depression. We know the lessons, and we know how to stop it happening again," he told the Guardian newspaper.
UKRAINE TAPS IMF, RUSSIA HIT
Ukraine, like Serbia and Hungary, sought the IMF's help to offset fears the government and banks might not be able to refinance debt.
Iceland, driven close to bankruptcy as frozen credit markets caused its banks to fail, will decide within a week whether to take an IMF loan.
A Ukraine presidential spokeswoman said: "President Viktor Yushchenko would hold a meeting with officials from the IMF, which is ready to give Ukraine credit of $14 billion for the stabilization of our country's financial sector."
In neighboring Russia, hit hard by the crisis and international wariness after a brief war with former Soviet Georgia, Finance Minister Alexei Kudrin said investors had pulled out $33 billion in August-September.
He said stocks would fall further.
A source said another Russian bank could be nationalized, bringing the total to four.
Hungary slashed its forecast for growth next year by almost two percentage points, showing its economy set to suffer even if it can quell market upheaval around its banks and finances.
On world share markets, buying of cheap bank stocks helped buoy prices though they later relinquished some of their gains.
Equities rose across the world on encouraging signals from technology firms. At 6:25 a.m. EDT, the FTSEurofirst 300 index of top European shares was up 1.2 percent while futures for the major U.S. stock indices were down 2.7-3.1 percent.
ASIA STRUGGLES
In Asia, governments scrambled to find ways to shore up their banks and try to combat an economic slowdown.
Reflecting growing alarm over the widening credit crisis, a panel of Japan's ruling Liberal Democratic Party was considering schemes to recapitalize big banks with government money, Kyodo news agency reported.
In South Korea, authorities pledged action to stabilize markets. Media reports said the steps, to be announced on Sunday, could include funding for local banks struggling to find international banks willing to lend dollars.
Australia's prime minister held a summit with industry leaders who said credit was drying up and smaller firms were collapsing despite assurances the economy was in good shape.
Singapore and Malaysia both said they would guarantee all bank deposits until 2010, following similar moves worldwide.
After world governments pledged $3.2 trillion to stabilize the financial sector, money markets have shown tentative signs of healing, though interbank lending is still tentative at best.
The interbank cost of borrowing overnight dollars fell again in Europe although longer rates, including those for euros and sterling, were slower to ease with banks still reluctant to lend for longer periods.
Until bank-to-bank lending -- frozen for much of the last year by uncertainty over which groups faced financial disaster -- is flowing freely again, corporate activity and consumer spending cannot hope to recover.
RECESSION
Evidence mounted that a recession may be unavoidable even if a financial meltdown has been averted.
Bank of Japan Governor Masaaki Shirakawa said there was growing uncertainty over the bank's view that the economy would return to moderate growth.
European Central Bank policymaker Guy Quaden said the euro zone's economic prospects had deteriorated over the last week amid the latest leg of the financial crisis.
Signs of trouble in China increased uncertainty about the world's main source of growth.
Listed Chinese firms put more than $1 billion of fund-raising plans on ice as the credit crisis and falling share prices began to cast a chill over China's fast-growing economy.
(Additional reporting by Reuters bureaus around the world; Editing by Mike Peacock)
