VIDEO: World Leaders Agree On Recession Plan

Many leaders stressed the need for changes including more regulation for the financial sector.

World leaders on Saturday backed a rapid response to the global economic crisis, agreeing on the need for measures to kick-start growth, better financial market regulation and more say for emerging countries.

But they did not commit to coordination of interest rate cuts or of public spending to counter what could be deep world recession, saying any moves were up to each country, according to a text of their summit communique obtained by Reuters.

Presidents and prime ministers from the powers of the 20th Century joined the leaders of new economic heavyweights such as export colossus China and oil-rich Saudi Arabia at the summit.

Their declaration, wrapped up during a five-hour meeting, also included a rejection of protectionism, a source close to the negotiations said.

"We agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries," the draft text said.

The leaders agreed to "use fiscal measures" and said they recognized "the importance of monetary policy support, as deemed appropriate to domestic conditions," the draft said, adding they would "take whatever further action needed to stabilize the financial system."

The leaders were still meeting in a Washington museum around a large map of the world symbolizing the global nature of their attempted economic rescue plan.

Signs are mounting of a painful economic slump in many regions, with the euro zone slipping into recession according to data last week, unemployment climbing in the United States and elsewhere and emerging economies slowing.

As the meeting got under way, the International Monetary Fund agreed to a loan worth at least $7.6 billion as part of a bigger plan for Pakistan where foreign currency reserves have dwindled and the risk of a default on its debts has grown.

In another sign of how countries around the world are suffering from the crisis, India on Saturday took the latest in a series of steps to improve money market liquidity and help exporters. Its central bank extended a special repurchase facility for mutual funds and non-banking finance companies and set a higher ceiling on export credit refinance for banks.

With U.S. President George W. Bush only two months away from leaving the White House and his successor Barack Obama choosing to stay away from the Washington summit, talk of a top-to-bottom overhaul of global finance has been tempered.

But many leaders stressed the need for changes including more regulation for the financial sector, where huge risk-taking on house prices, especially in the United States, backfired last year and triggered the downturn.

The summit communique agreed on Saturday said "regulators must ensure that their actions support market discipline, avoid potentially adverse impacts on other countries, including regulatory arbitrage...," the text said.

"We pledge to (...) ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances" he said.

Some analysts said agreeing to oversight of financial markets could provide a compromise for countries worried about extending more formal regulation to areas such as hedge funds.

An action plan annexed to the draft gave hedge funds and private equity firms an apparent exemption from new controls, saying they "should bring forward proposals for a set of unified best practices" to be reviewed by finance ministers.

Bush, who opposes calls from some countries for sweeping new rules for the financial industry, said before the meeting on Saturday that leaders were looking for "a way forward to make sure that such a crisis is unlikely to occur again."

"I am pleased that the leaders reaffirmed the principles behind open markets and free trade," he told reporters before the talks. "One of the dangers during a crisis such as this is that people will start implementing protectionist policies."

"This crisis has not ended. There's some progress being made but there's still a lot more work to be done."

Saturday's meeting is expected to pave the way for more work in coming months and another summit in the early months of 2009 when a newly installed President Obama could consider potentially far-reaching changes to the financial system.

Obama is due to take office on Jan. 20.

As well as new regulation, leaders are considering ways to open up global institutions such as the IMF to emerging economies whose export-funded reserve cashpiles have made them important economic players.