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European Leaders Call for Summit to Overal Global Financial System

BY Admin  October 15, 2008 at 9:21 PM EDT

French President Sarkozy after an EU summit

“If we can bring coordinated answers to the financial crisis, can we not bring coordinated answers to the economic crisis?” French President Nicolas Sarkozy asked.

France, Germany and Britain pushed for the Group of 8 industrialized nations to meet later in the month to consider an overhaul of the current Bretton Woods system that became the backbone of the international financial system in 1944. British Prime Minister Gordon Brown argued that the framework as is no longer fits the world’s interlinked financial centers.

Sarkozy said he would meet with U.S. President George Bush on Saturday.

France currently holds the rotating presidency of the European Union making Sarkozy the organization’s representative on the world stage. After an E.U. summit last weekend, several nations in the bloc injected funds into their banks Monday, a move the U.S. followed with an infusion of $250 billion into the nation’s struggling banks.

Still, world leaders some didn’t think the reaction was swift enough.

“The markets are selling off stocks because investors still think the steps by U.S. authorities are not sufficient,” said Japan’s Prime Minister Taro Aso. Japan’s Nikkei lost more than 11 percent and the pan-European FTSEurofirst 300 lost 3.4 percent.

Several of Europe’s banks took further action to increase liquidity, including moves by the European Central Bank to offer more funds across a broad range of currencies.

In Switzerland, two of the non-E.U member’s largest banks — Credit Suisse and UBS — announced they would receive funds from the government and outside investors. The Swiss National Bank said it would help absorb some of UBS’ assets while a group of global investors, including the Qatar Investment Authority, will give funds to Credit Suisse, the New York Times reported.

In the United States, Wall Street has a skittish opening Thursday after news that the Consumer Price Index, a measure used to judge inflation pressures, was flat in September. The Dow Jones industrial average was down 2.86 percent, or 245.47 points, at 8,332.44. The Standard & Poor’s 500 Index was down 25.23 points, or 2.78 percent, at 882.61. The Nasdaq Composite Index was down 41.50 points, or 2.55 percent, at 1,586.83.

The Dow fell 733 points on Wednesday after an incredible rally on Monday.

The Labor Department reported that the consumer price index remained flat in September as falling gas prices and declining costs for clothes offset rising prices for food and medical care. The CPI fell 0.1 percent in August. In June, it soared 1.1 percent, sparking fears that inflation would hit an already stagnant economy.

The core index, a measurement that excludes volatile prices such as energy and food, rose just 0.1 percent in September.

Another Fed report that found industrial production in the U.S. posted a drop of 2.8 percent, its biggest drop since 1974, as a result of Hurricanes Gustav and Ike. Forecasters had predicted a 0.8 percent decline.