Nov. 7 (Bloomberg) -- European Union leaders pushed for tighter world financial regulation as the credit crisis hammers the global economy, throwing down the gauntlet to President-elect Barack Obama.

The EU sought more powers for the International Monetary Fund, called for stiffer regulation of credit-rating agencies and hedge funds, and urged a crackdown on risk-taking and bankers' pay.

``We don't want to move from an absence of regulation to too much regulation, but we want to change the rules of the game,'' French President Nicolas Sarkozy said after EU leaders finalized proposals for next week's global summit in Washington.

European calls for more globalized regulation are likely to face U.S. resistance, confronting Obama, 47, with a first test of his international economic leadership even before he takes office on Jan. 20.

Sarkozy, holder of the 27-nation EU's six-month presidency, will present the European proposals at a Nov. 15 summit of leaders of the Group of 20 industrialized and developing countries in Washington.

As Obama huddled with economic advisers in Chicago today, the EU upped the stakes by setting a late February deadline to prepare ``initial measures,'' barely a month after he moves into the White House.

`Very Ambitious'

European Commission President Jose Barroso said the gravity of the financial crisis triggered a ``real determination'' in the U.S. to work with Europe on ``sensible'' regulation.

``We are very, very close,'' Barroso said in a Bloomberg Television interview. ``There is a real understanding now about the need to have a common approach for global governance in the financial sector.''

The EU also larded the agenda with calls for next week's summit to pursue financial reforms that promote the fight against poverty and climate change, advance the stalled World Trade Organization talks and combat hunger in the developing world.

``We want President Obama to help us introduce more justice in the world's affairs, help us modify global governance, and put environment at the heart of the priorities of the world,'' Sarkozy said.

The Europeans shouldn't expect too much from an Obama presidency, said Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels. ``It's extremely unlikely that the Americans will agree on anything at this stage,'' he said an in interview today.

Europe, the U.S. and Japan will plunge into the first simultaneous recession in the post-World War II era in 2009 as the credit crunch ripples around the world, the IMF forecast yesterday.

European Contraction

The IMF predicted a 0.5 percent contraction next year in the 15 EU countries sharing the euro, led by a 0.8 percent drop in Germany. Britain, the largest EU country using its own currency, is heading for a 1.3 percent slide.

The September collapse of Lehman Brothers Holdings Inc. led to a virtual freeze in credit markets and threatened the global financial system, prompting EU commitments of more than $3 trillion to guarantee bank loans and provide capital to lenders.

The European Central Bank cut interest rates for the second time in a month yesterday, by a half point to 3.25 percent, and signaled more reductions in the pipeline. The Bank of England chopped its benchmark rate by 1.5 points to 3 percent, the lowest since 1955.

Prime Minister Gordon Brown said the U.K. and other countries are ready to keep spending to counter the economic slump after bailing out the financial industry.

``The next stage is to work together to make sure our monetary and fiscal policies can help move our economies forward,'' Brown said. ``It is an emerging strategy that has increasing global support.''

IMF Role

The keystone of today's EU proposals was to strengthen the powers of the Washington-based IMF, set up after World War II to monitor financial flows and act as lender of last resort to financially strapped countries.

``The task of preventing financial crises will fall to the IMF,'' a post-summit statement said. It envisioned ``a central role in a more efficient financial architecture'' for the IMF, though without giving it control of other regulatory bodies.

The U.S. opposes a global financial regulator with cross- border authority, the New York Times reported Nov. 5, citing an unidentified senior U.S. official.

The EU also called for better global surveillance of credit- rating companies such as Standard & Poor's and Moody's Investors Service, along the lines of Europe-wide regulations the European Commission will propose on Nov. 12.

Regulators' Panel

An international panel of regulators has cautioned the EU not to act on its own, after the U.S. imposed rules more in line with a global code of conduct.

The EU roadmap includes restraints on executive pay, following moves in some countries to limit director bonuses at banks receiving bailouts. The commission plans next year to revisit a recommendation from 2004 -- almost universally ignored - - that countries boost disclosure and shareholder votes on compensation.

European leaders also jockeyed over who will take part in the Washington summit, an initial sign of the hurdles to a global agreement. Sarkozy said he would have two seats -- as French leader and as holder of the six-month EU presidency --and will cede one of them to Spain.

Sarkozy said there will be no room in Washington for the head the council of finance ministers of countries using the euro, Luxembourg Prime and Finance Minister Jean-Claude Juncker, normally a fixture at international finance meetings.

Juncker won't go because he represents finance ministers, not the heads of government who will attend the Washington parley.

``Since I am the chairman of a finance group, my natural place will be my bed and not Washington,'' Juncker said.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

Last Updated: November 7, 2008 13:13 EST