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EU says new measures needed for financial meltdown

Barroso said the economic turmoil would dominate discussions at the two-day, 43-nation, Asia-Europe Meeting, a summit that opens Friday in the Chinese capital. Leaders hope the summit will help build consensus on a response to the crisis before a Nov. 15 meeting in Washington.

“We need a coordinated global response to reform the global financial system. We are living in unprecedented times and we need unprecedented levels of global coordination," Barroso said at a news conference at the EU's Beijing office.

“It's very simple; we swim together, or we sink together," he said.

While outlining no specific proposals, the former Portuguese prime minister said a solution needed to be based on principals of transparency, responsibility, cross-border supervision, and global governance.

The worst global financial crisis in seven decades pointed to the need for a “major reform" of the world's financial system, he said.

“The latest events have made clear that the current model of financial regulation and supervision needs to be revamped at the international level," Barroso said. “We need Asia to be on board."

The collapse of the U.S. housing market has prompted a credit freeze in the U.S. and around the globe that could severely affect economic growth.

Drastic actions by the Federal Reserve and the U.S. administration have yet to turn the American economy around. Businesses are reluctant to hire and boost capital investments, consumers have hunkered down, and all the economy's problems are feeding off each other.

The chaos has spread to the EU's financial sector and into the economic mainstream, sending growth rates plummeting and prompting the bloc to put up Ð1.7 trillion (US$2.3 trillion) in guarantees and other emergency measures to save the banking system.

Although Asian economies had less direct exposure to the toxic sub-prime mortgages that are wreaking havoc on U.S. and European markets, they expect to take a major hit from a drop in exports and foreign investment.

The vice president of the Bank of China, the country's central bank, said he expected the crisis to start to bite over the next six months.

“We shouldn't think this is going to be over soon. The key issue for Asian countries is to prevent the banking crisis from turning into to a currency crisis," Zhu Min said in remarks to the Asia-Europe Business Forum in Beijing.

“This is going to be a long and cold winter," Zhu said.

Even before the crisis hit last month, China's juggernaut economy was beginning to slow. Growth in the third quarter of this year was 9.9 percent, which, although the fastest among the largest economies, was down from 11.9 percent for all of 2007. The World Bank says a further retreat is expected next year.

One of the hardest-hit, Pakistan, has sought help from the International Monetary Fund to avoid defaulting on billions of dollars in loans and skirt a financial crisis brought on by high fuel prices, dwindling foreign investment and soaring militant violence.

South Korea's stock market, meanwhile, has slumped to a three-year low amid heavy selling by foreign investors.