Oct. 16 (Bloomberg) -- European Union leaders pressed for an overhaul of the global financial system to prevent a repeat of the credit crunch that sparked the biggest stock-market selloff since the Great Depression.

EU leaders called for a global summit as soon as next month to rewrite the 1944 Bretton Woods accord that paved the way for Europe's post-World War II reconstruction and set up the institutions that oversee the world economy today.

``We do not have the right to miss this opportunity to re- construct our financial system,'' French President Nicolas Sarkozy told reporters today after chairing a two-day EU summit in Brussels. ``Crises can be turned into opportunities.''

The European initiative is likely to face resistance from the U.S., which has used its dominance of international financial institutions to promote its brand of capitalism.

``The U.S. got what it wanted in 1944 and, I suspect, will do so again simply because the Europeans won't be able to decide what they want,'' said Martin Weale, director of the National Institute of Economic and Social Research in London.

Sarkozy today went beyond calls by fellow European leaders such as U.K. Prime Minister Gordon Brown for global bank supervision and tighter regulation, saying governments need to consider re-anchoring currencies, the hallmark of the original Bretton Woods agreement.

Currencies

That dollar-based monetary system fell apart in the 1970s, giving way to today's freely floating currencies.

President George W. Bush ``definitely'' favors holding a Group of Eight meeting before the end of the year, White House spokesman Tony Fratto said in Washington. European governments pressed for a wider summit, including leaders of developing economies such as China, India, Brazil and South Africa.

To jumpstart that process, Sarkozy, holder of the EU's six- month presidency, will travel with European Commission President Jose Barroso to the U.S. on Oct. 18 to meet Bush.

Separately, concern mounted that the banking crisis will drag down the broader European economy, where business and consumer sentiment had already slumped to the lowest level since the September 2001 terrorist attacks in the U.S.

``This financial crisis is starting to have an impact on consumers and companies,'' Barroso said.

Global Approach

While stressing a global approach to regulation, European governments have yet to spell out what they want from the wider summit. It was unclear whether leading countries -- including Britain -- would give up their longstanding opposition to handing over business regulation to outside authorities.

Calls for a single financial supervisor in Europe continued to get little traction. Instead, the leaders agreed that bank supervisors from the 27 countries will meet once a month to share insights.

Proposals for stiffer regulation floated by EU leaders included more international supervision for cross-border banks, a global ``early warning'' system for crises, a revamp of the International Monetary Fund, tougher regulations on hedge funds, new rules for credit rating companies, limits on executive pay and punishments for excessive risk-taking.

Level Playing Field

EU leaders will set up a financial crisis taskforce to improve coordination among the bloc's 27 governments, and endorsed an easing of ``mark-to-market'' accounting to maintain a level playing field with the U.S.

That accounting standard, lampooned as ``absurd'' by Sarkozy, forced banks to alter the value of their securities holdings along with daily market fluctuations, exacerbating losses in times of market slumps.

Prime Minister Brown, author of the British bank-bailout plan that was copied across Europe and in the U.S., called for an end- of-year deadline to place each of the world's top 30 banks under the supervision of a panel of regulators from the countries where it is active.

``The reform of the international financial system is not only necessary to prevent a crisis happening again, it is essential to end the current crisis,'' Brown said today.

Tax Havens

Treatment of tax havens such as the Cayman Islands and Monaco may be overhauled as part of any new global financial framework, Sarkozy said.

``It will be part of discussions Saturday in Washington,'' the French leader said. ``Will we continue to work with tax havens? It's a valid question. We've passed into a new era. It's a question we'll put on the table and immediately.''

EU governments initially reacted to the crisis in a ``piecemeal and ad hoc'' fashion, ``creating an impression of disorder and sending confused signals to financial markets,'' aides to Barroso said in a paper prepared last week.

In the meantime, European leaders have committed as much as $2 trillion to guarantee interbank lending and buy stakes in banks, to prevent hobbled credit markets from tipping the broader economy into recession.

The U.S. followed suit, announcing an unprecedented $250 billion government investment in banks, starting with nine institutions deemed critical to the survival of the system.

Growing doubts that the bailout will keep the U.S. out of recession hammered U.S. stocks, leading to the steepest plunge since the crash of 1987.

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

Last Updated: October 16, 2008 10:40 EDT