Major shift

The move at the summit, hosted by Angela Merkel, the German Chancellor, appears to be a major shift in the position of countries such as Britain, which has embraced unregulated, free-market capitalism.

All the leaders present agreed to a tough stance on hedge funds, the highly speculative and lightly regulated products that have been blamed for some of the instability in the financial markets, a German government source told the AFP news agency.

"The demand for direct regulation of hedge funds is no longer questioned by any of the participants," the unnamed source was quoted as saying.

The leaders of Britain, France, Germany, Italy, Spain and the Netherlands were meeting in Berlin to hammer out a joint European position for the meeting in London of the G20, a group of finance ministers and central bank chiefs from 20 of the world's largest economies, including the EU.

Lack of unity

But within any "European position", there are likely to be divisions.

"There is a certain degree of unity, but it doesn't hide the differences," Jacques Reland, the head of European research at the Global Policy Institute, told Al Jazeera.

"They all say there is a need to regulate financial markets, hedge funds, ratings agencies and so on, but its well known that France and Germany on the one hand, and the UK [on the other] do not see eye to eye.

"The UK has been a proponent of 'light touch' regulation."

The world's major economic powers are under pressure to build on
pledges made at the G20 summit in Washington in November, where they
formulated an action plan for fighting the global economic crisis.

"One thing that should help the Europeans," Reland said, "is that now the US administration is on the same wavelength and would help and collaborate in order to achieve certain controls."