Sarkozy muscles in on PM's glory

Gordon Brown's key role in heading off a global financial crisis was challenged last night by the French President, Nicolas Sarkozy.

The two leaders jostled for position at a European summit in Brussels amid tensions between them over who should get the credit for the landmark decision by governments around the world to take stakes in ailing banks.

Mr Brown has won international praise for his Government's decision to spend £37bn on buying shares in British banks, a move which EU nations and the United States later copied.

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Bur M. Sarkozy, whose country holds the EU presidency, appeared to claim ownership of the rescue plan. He told the summit: "For the first time in financial history, it is plans worked out in the EU which have inspired the measures taken in other countries of the world, including the US. Europe has shown leadership in dealing with the crisis and I welcome this."

The two leaders are also trying to broker an agreement among world leaders for a global summit to prevent a repeat of the financial crisis.

The Prime Minister proposed sweeping reforms to create a "new financial order" in which national regulators like Britain's Financial Services Authority would work more closely together to ensure sound banking practices throughout the world.

He hopes that a formal announcement would be made within days of a world leaders' summit to be held in November or December, involving nations beyond those in the G8.

The Prime Minister has spoken to other leaders about the talks. George Bush, who remains in office until January, will represent the US although his successor – Barack Obama or John McCain –would probably meet the other leaders in the margins.

Last night, the G8 issued a statement calling for a global summit "in the near future". They also supported Mr Brown's call to use the meeting to kickstart the stalled talks on a global trade agreement, which would boost the world's prospects of avoiding a prolonged slowdown.

Mr Brown hopes to capitalise on his success by securing a new "Bretton Woods", the 1944 agreement which created the current system of global financial institutions, such as the IMF.

"We need to deal with the crises as they arise in a better, more coordinated way. The IMF has got to be rebuilt as 'fit for purpose' for the modern world," he said. The financial bodies had been designed for a world of national markets and had to rebuilt to suit today's global economy. Mr Brown called for "very radical changes that will renew people's confidence in both the banking system and the financial system".

He wants regulators to investigate the world's 30 leading banks and insurance companies by year-end as part of his new deal, to ensure bad practice by multinationals is not hidden from watchdogs and that an "early warning system" is in place which could prevent problems growing.

In a report presented to yesterday's EU meeting, Mr Brown said the reforms should be based on five principles – openness; integrity and no conflicts of interest; management taking responsibility for risks ; sound banking practices and cross-border coordination.

Yesterday, the European Central Bank pumped another £195bn into the system to boost bank lending. Today, the EU leaders are expected to endorse Mr Brown's approach, bringing all 27 member states into line with the measures that Britain and the 15 counties in the eurozone have taken.

But there is unlikely to be agreement on a European Commission plan for a £78,000 EU-wide guarantee for individual saver deposits from next year. Britain's current limit is £50,000.

The downturn has raised questions about whether the EU will water down its goal to cut carbon emissions by 20 per cent by 2020. Some countries are arguing for a rethink but Mr Brown said it was not the time to abandon a climate change agenda, which was part of the solution for global problems.

Some smaller EU countries were concerned that they had been left out of the EU plan to rescue the banks.