French President Nicolas Sarkozy told the EU summit in Brussels a 'new form of capitalism' was needed, as European fears grew that the US subprime debacle could plunge the global economy into recession despite unprecedented rescues of banking giants.
Concern about a deepening slowdown wiped away optimism earlier this week that the worst of the crisis was over, with global stock prices falling sharply once again on recession fears and investors scurrying into safe havens such as gold.
'We are not at the end of the crisis. We are still living in dangerous times,' Luxembourg Prime Minister Jean-Claude Juncker said.
Mr Sarkozy said the credit crunch was 'one crisis too many' after the bubble of enthusiasm about a new Internet-driven economy burst in 2001.
'The system must be completely overhauled, an overhaul that must be global,' he told the meeting.
He said any new structure should be based on values which put finance at the service of business and citizens, and not vice versa.
The EU leaders were at odds over plans to curb climate change, with Italy and Poland calling for caution during the economic crisis and other nations arguing that new green industries will spur growth.
The meeting in Brussels had originally been expected to focus on how the EU would reach its goal of cutting carbon dioxide emissions by 20% by 2020, but was overtaken by failing banks, plunging stock markets and warnings of recession.
Eastern European countries and some of Europe's traditional industries say the plan is too costly in light of the crisis, but several EU leaders said that rescuing the economy and the planet could go hand in hand.
The meeting was marred by a long-standing conflict between Poland's government and president, which turned ugly when the head of state barged into the meeting - illegally, the prime minister insisted.
Prime Minister Donald Tusk had denied President Lech Kaczynski a government flight to Brussels to try to keep him away from the summit, but the head of state chartered a plane at the last minute and came anyway, raising eyebrows among EU diplomats.
The two leaders reluctantly sat next to each other at the summit table, while cabinet ministers downstairs accused Mr Kaczynski of harming the country's foreign policy interests.
Taoiseach Brian Cowen earlier reported to the Council on developments since the Lisbon Treaty referendum defeat.
