Asian, European leaders' pledges on financial crisis leave questions

The leaders of more than 40 countries emerged from two days of talks pledging to comprehensively reshape the worlds financial system, and that concrete steps would be taken at an emergency meeting in Washington next month.

The bold statements from the Asia-Europe Meeting (ASEM) appeared to be a victory for French President Nicolas Sarkozy, who made it clear his main goal in Beijing was to win Asian support for his ambitious financial reform plans.

Sarkozy is looking to completely reshape the global economic structure to replace the Bretton Woods system that has governed international finance since the end of World War II, with the Washington summit to kick off the process.

"The fact that so quickly all the Asian leaders agreed on the principles that we brought to this meeting is a good demonstration of the possibility of reaching a consensus," European Commission chief Jose Manuel Barroso told AFP.

But the statements that emerged out of the ASEM forum appeared to be more a show of unity to a frightened public as the global financial crisis deepens, with no actual firm plans presented, according to some economists and analysts.

"My impression is that there are a lot of warm words but there doesn’t seem to have been much move towards any firm coordinated action," said Mark Williams, a London-based economist with Capital Economics research consultancy.

"I’m skeptical as to whether anything more will emerge in Washington in a couple of weeks time."

The emergency Washington summit on November 15 will gather the Group of 20 largest industrialized countries and developing economies to look at ways to end the worst financial meltdown since the Great Depression.

While Sarkozy and many in Europe are looking for wholesale restructuring of the financial system with a far greater regulatory oversight, U.S. President George W. Bush has insisted the tenets of the free market must remain.

"As we focus on responses to our short-term challenges, our nations must also recommit to the fundamentals of long-term economic growth -- free markets, free enterprise and free trade," Bush said on Saturday.

A joint statement from the ASEM summit appeared to show that Asian leaders had begun to lean towards Sarkozy in this debate.

"Leaders pledged to undertake effective and comprehensive reform of the international monetary and financial systems," the statement said.

Chinese Prime Minister Wen Jiabao also said he wanted to see much greater regulation of the financial system.

But Michael Pettis, an American finance professor at Beida University in Beijing, said that Asian giants China, Japan and South Korea, or indeed any strong nations, were unlikely to give up too much independence on this issue.

"I don’t think that any powerful country would be very eager to give up sovereignty to any supranational bodies," Pettis said.

And while Wen called for greater regulatory oversight of the financial system, Pettis pointed out that China in particular was normally extremely reluctant to give up sovereignty to an international framework.

Joseph Cheng, political professor at the City University of Hong Kong, said Asian nations may have pledged quick and major reforms of the financial system, but that did not mean they would all lobby the same way in Washington.

"We cant ask too much," he said when giving his assessment of the promised quick and major action in Washington.

"China supports the reforms in principle but Japan has to be careful as it does not want to antagonize the United States. ASEAN (Association of Southeast Asian Nations) is not sure yet," he said.