March 26 (Bloomberg) -- French President Nicolas Sarkozy met Queen Elizabeth II in London after calling for closer ties with Britain and efforts to keep the European economy and the region's defense industry competitive.

``Can't we weigh together on our American friends so that the dollar recovers,'' Sarkozy said in an interview with BBC Radio 4 broadcast in London today. ``Can't we put our armament industries together to spend less money and be more efficient?''

The French president, who began a two-day visit to the U.K. today, also said both countries should work together to shape a common immigration policy for the European Union to regulate flows from Eastern Europe and Africa, increase anti-terrorism cooperation, create rules forcing rating companies to be more transparent and overhaul international institutions.

He is due to meet U.K. Prime Minister Gordon Brown tomorrow and will address both houses of the U.K. Parliament today at 4 p.m. London time. Sarkozy met the queen after arriving in London and traveled to Windsor Castle, where he is staying.

Brown, speaking during a debate in Parliament, said he would work with Sarkozy on immigration and economic policies, especially to spur banks to making their finances more transparent.

``Our talks in the next few days will be very constructive,'' Brown said in the House of Commons today. ``I hope that in our talks today and tomorrow we can agree to tighten up controls at Calais. It is right that France and Britain agree measures that we can put to the international institutions that will strengthen our economies.''

Euro and Defense

Sarkozy's repeated complaints over the past year that the euro's appreciation against the dollar is pushing European companies, including planemaker European Aeronautic, Defence & Space Co., to cut jobs at home and relocate some activities abroad have failed to stem the currency's gains. The euro has risen 17 percent against the dollar over the past 12 months, and reached a record $1.5904 on March 17.

The pound slipped today against both the dollar and the euro after Bank of England policy makers suggested the British currency may slide further.

``The risks are balanced to the downside,'' Bank of England Chief Economist Charles Bean told Parliament's Treasury committee. Andrew Sentance, a member of the central bank's policy panel, said, ``You'd expect to see some further decline in sterling.''

French Ambition

Sarkozy told the BBC that Europe needs the U.K. to fully participate in its functions and institutions to benefit from Britain's economic vitality. Asked whether former U.K. Prime Minister Tony Blair would be a good president for the EU, Sarkozy stopped short of endorsing him, while saying he has ``a lot of admiration and friendship'' for the ex-British premier.

The French president suggested that France may increase its troops in Afghanistan to help the U.S., the U.K. and other NATO countries fight Taliban insurgents, provided that allies commit troops for the ``long'' term. NATO can't afford to lose in Afghanistan because that's where part of the global fight against terrorism is at stake, Sarkozy told the BBC.

``I want a new Franco-British fraternity,'' Sarkozy said. ``I'd like you to see us as historical allies for the future, as definitive friends.''

Sarkozy and his third wife Carla Bruni-Sarkozy will be welcomed by Queen Elizabeth II today. She will host a lunch and later a state banquet for them at Windsor Castle. Sarkozy is scheduled to address the U.K. parliament today as well.

He will meet Brown tomorrow for a Franco-British summit and meet business people during a dinner hosted by London's Lord Mayor David Lewis.

To contact the reporter on this story: Francois de Beaupuy in London at fdebeaupuy@bloomberg.net.

Last Updated: March 26, 2008 09:13 EDT