EU leaders seek broad bank reform

Gordon Brown on Europe's 'common action' over the crisis

European leaders are calling for major reform of the global banking system, as they meet to discuss an EU rescue plan.

UK PM Gordon Brown said the IMF should be "rebuilt" to help regulate the world's financial systems.

German Chancellor Angela Merkel backed French calls for better international supervision of the financial system.

Meanwhile, eight east and central EU members issued a statement saying targets on climate change, the original focus of the summit, should be eased.

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Poland threatened to use its veto on some parts of the legislation package unless its coal-based economy was shielded from the impact.

France, which currently holds the EU presidency, is keen to push through the legislation by the end of this year.

Earlier, the European Commission's President, Jose Manuel Barroso, had urged leaders not to forget climate change.

"Climate change does not disappear because of the financial crisis," he said. "Tackling climate change is central to Europe's future prosperity."

Early warning system

Speaking to reporters on Wednesday ahead of the meeting, Mr Brown made an impassioned plea for a global summit to reform the International Monetary Fund (IMF), to help regulate the world's financial systems.

He also called for the creation of an early warning system for the international economy and for more cross-border supervision of multinational financial companies.

"We need to deal with the crises as they arise in a better, more coordinated way," Mr Brown said.

"The IMF has got to be rebuilt as 'fit for purpose' for the modern world."

Mrs Merkel said a G8 summit should be held with the participation of emerging countries.

Earlier this week, French President Nicolas Sarkozy called for joint EU-US action, and said he would go to Washington with Mr Barroso to persuade President George W Bush and his successor to come on board.

Regulatory rethink?

At Wednesday's EU summit, the 27-member bloc is expected to rally behind plans agreed on Sunday by officials from the 15-nation eurozone.

Jose Manuel Barroso pays tribute to Gordon Brown

It will discuss lifting the guarantee on bank deposits to 100,000 euros ($136,760; £77,760) within a year.

The proposal is one of several due to be tabled at the summit, and follows a commitment last week to raise the guarantee level to 50,000 euros.

But the cost of the latest proposal is likely to concern smaller EU countries.

Ferenc Gyurcsany - the prime minister of Hungary, one of the worst affected EU countries - called for more Europe-wide support for individual nations.

"The current approach is to let the nation state apply its own instruments, but we urge more common actions," he said. "We need a supervisory body at a European level".

EU Internal Markets and Services Commissioner Charlie McCreevy said increasing the minimum protection by next year would "strengthen Europeans' confidence in the safety of their deposits".

Also on the packed agenda for the two-day talks:

• Leaders are expected to sign an immigration pact, committing their countries to common principles for handling immigrants
• A decision to revive the failed Lisbon treaty, meant to give the EU more stable institutions in difficult times, is expected to be put on the back-burner until December
• Talks on a new EU-Russia partnership treaty have been postponed, amid continuing concern about Russia's military presence in Georgia. There are divisions in the EU about when to resume them

Markets across Europe rallied after eurozone governments last Sunday pledged around $3 trillion (£1.7 trillion) to restore confidence in the banking system.

But on Wednesday recession fears sent both US and European share prices plummeting.

Asian and European stock markets also lost ground following two days of dramatic rises, and a report suggested Germany, the EU's biggest economy, was on the verge of recession.