Big 4 to Voice Confidence in Europe Economy -Draft

The communique will acknowledge that economic prospects have deteriorated after years of solid growth.

The leaders of Britain, Germany, France and Italy will on Tuesday publish a declaration of confidence in Europe's capacity to weather increased economic uncertainty and financial turmoil, according to a draft communique.

They will also urge credit ratings agencies to do a better job of informing investors on the risks inherent in structured financial products, short of which governments will consider forcing the issue via regulation.

The calls are contained in a communique to be published at a meeting of the four leaders on the global credit crunch in London, of which the contents of a draft version were relayed to Reuters by a government official.

The communique will acknowledge that economic prospects have deteriorated after years of solid growth, noting that leaders are confident in the fundamental strengths of Europe's economy and are ready to cooperate closely.

"Recent financial turbulence has increased the risks for 2008," the communique will say, according to the draft version, which the official said was subject to minor changes prior to release but unlikely to change substantively.

"We remain committed to cooperating closely to maintain economic stability and to strengthening and deepening economic reform," the draft says.

It highlights the "strong fundamentals" of the European economy.

British Prime Minister Gordon Brown meets Germany's Angela Merkel, France's Nicolas Sarkozy and Italy's Romano Prodi to discuss the economic outlook and what should be done in the wake of the global credit crunch that took hold in August. Brown and the other leaders at scheduled to meet for about two hours and hold a brief news conference around 1900 GMT.

Brown floated the idea of the summit in December though it it now comes hard on the heels of revelations by Societe Generale of a trading loss of 4.9 billion euros, a world record that the bank blamed on a 31-year-old trader it says acted alone and without consent from his employers.

The leaders will renew an appeal their finance ministers made at a Paris meeting this month for greater transparency and disclosure of information by financial institutions.

They will also call on the International Monetary Fund to draw up a report on threats to the world's economy from financial instability, asking it to work hand-in-hand with another body known as the Financial Stability Forum (FSF).

The FSF is asked to draw up international standards to boost the quality of information on exposure to structured investment products and how they are valued, the text notes. It also asks for further work by the Basel committee on liquidity standards.

The communique will also endorse the idea that credit-rating agencies be given the opportunity to come up with "market-led solutions" to improving the quality of rating of structured investment products.

But it contains a sting.

"If market participants prove unable to address these issues we stand ready to consider regulatory alternatives," the text says.

It also says leaders support work underway at the FSF and at European Union level on improved supervision, noting that this should include "strong consolidated supervision of cross-border European institutions".