Gordon Brown and Nicolas Sarkozy issued rival plans to rescue the global financial system yesterday as they jousted over who should take charge of far-reaching regulatory reforms.

The French President sprung into action after Mr Brown issued a detailed document that challenges European leaders to move to “stage two” of his bank rescue plan, and calls for a new Bretton Woods-style conference to reorganise financial regulation.

Not to be outdone, several hours later Mr Sarkozy handed out his own two-page paper demanding a global overhaul of the financial system and “a new form of capitalism”.

Like Mr Brown, he also called for a meeting of key international players before the end of the year and referred to “a new Breton Woods”, saying that this repeated his ideas from a speech to the United Nations last month.

Mr Sarkozy could not compete with Mr Brown’s claim to have been first with the call for a new world order, which the Prime Minister said he initially made after the Asian financial crisis of 1998. But the French President last night gave a press conference spelling out his aims to tackle tax havens and hedge funds, after he has discussed European plans with President Bush this weekend.

Mr Brown went further than Mr Sarkozy by including in his plans the revival of world trade talks to stave off a recession, but Mr Sarkozy took his revenge later by avoiding all mention of Mr Brown’s ideas in his press conference at the close of the first day of the two-day summit.

Either way, the G8 gathering of the world’s biggest economies issued a statement last night supporting the idea of a summit “in the near future”.

EU leaders are expected to back Mr Brown’s initial banking plans today. They will follow the lead of the 15-member eurozone, which accepted Mr Brown’s principles of underwriting interbank lending and taking stakes in struggling banks on Sunday.

Mr Brown went further yesterday. “Stage one was to stabilise the financial system with liquidity, recapitalisation and trying to get funds moving for small businesses and consumers,” he said. “Stage two is to make sure that the problems of the financial system, which started in America, do not recur.” The target was to “root out irresponsibilities and excesses” in the system. “We need supervision and regulation where it has been lacking and where it is necessary, and international co-operation. We need an early warning system and proper co-ordination.”

Mr Brown said the last big shake-up of the financial system — the 1944 Bretton Woods accord —had been designed for a world of national financial markets. In today’s global economy, bodies such as the International Monetary Fund had to be rebuilt He released a paper with eight proposed reforms to supervision and regulation that he wanted implemented by the new year, including new standards for disclosing off-balance-sheet accounting and supervisors for the 30 biggest cross-border corporations in Europe and America — mainly banks and insurance companies.

By the time of the spring meetings of the IMF and the World Bank, Mr Brown wants further reforms, including an overhaul of executive pay “to address compensation structures that encourage excessive and irresponsible risktaking” and instead “align reward with long-term value creation”.

In addition he set out four goals for a new Bretton Woods discussion. It should set up a global early-warning system for financial risks; set international standards of regulation; create effective cross-border supervision; and bring new mechanisms for co-operation in a crisis.

Mr Brown surprised many with a call to restart world trade talks, which collapsed in the summer. “Protectionism may give some countries a short-term advantage but in the long run it will not help. The message must go out that this ‘beggar-my-neighbour’ approach of the past is of no use in the future and one big symbol of that would be a world trade deal saying that protectionism is unacceptable.”

Some may have detected the hand of Lord Mandelson, the Business Secretary, who strove hard but failed to broker a world trade deal while EU Trade Commissioner.

The Prime Minister and his team were keen to emphasise his frenetic activity in the past 24 hours. He had talked to President Lula of Brazil, President Bush, Kevin Rudd, the Australian Prime Minister, Wen Jiabao, the Chinese Premier, and half the leaders of Europe. Mr Brown even found time for lunch with the Party of European Socialists — an event that Tony Blair spent an entire decade avoiding.

Although the financial crisis was grabbing the headlines, the summit was rocked by threats from Italy and Poland to scupper a detailed agreement on cutting carbon dioxide emissions. EU leaders promised last year to cut emissions by 20 per cent, compared with 1990 levels, by 2020.

They also pledged to have renewable energy make up 20 per cent of total sources and to set strict emissions levels for cars. But many EU nations, particularly in industrial Central Europe, are worried about the costs and the impact on industry. Squabbling rivals air grievances, page 39

Gordon’s to do list

By the end of the year

— Overhaul system that forces banks to value toxic debt at its present firesale value, which may underestimate its true worth

— Banks to improve risk disclosures

— Banks to use new rules to police their liquidity

— Toughen regime for credit rating agencies

— Force banks to hold bigger stakes in loans they pass on through securitisation

— Set up central clearing house allowing complex derivatives deals to be known to all parties

— Banks’ scope to park questionable investments “off balance sheet” to be reined in

— Set up cross-border coordination of supervision of each big financial group

By spring 2009

— Stronger incentives for banks not to take excessive risks

— Greater transparency to stop dodgy assets being concealed

— Tighten regulation of firms presently not policed

— Understand and police impact of financial dangers on economies

And now, the world

— Set up global early warning system to identify threats

— Impose uniform standards for regulation

— Cross-border watchdogs to supervise multinationals

— Strengthen ways to cooperate in future crises

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