EU warns sink or swim in financial meltdown

The global financial meltdown is injecting a sense of urgency into a summit of European and Asian leaders that gets under way in China's capital on Friday.

EU Commission President Jose Barroso set the tone early, saying "unprecedented levels of global coordination" were needed to deal with the crisis.

"It's very simple: We swim together, or we sink together," Barroso said Thursday at a Beijing news conference ahead of meetings with top Chinese leaders.

Held every two years, the Asia-Europe Meeting _ known as ASEM _ has no mandate to issue decisions, but participants hope it will produce some degree of consensus ahead of a Nov. 15 meeting of the world's top economies in Washington to discuss the worst financial crisis since the 1930s.

That may be too lofty a goal for a 43-nation grouping whose members differ widely on their views toward international cooperation and intervention by global bodies. Free-trading Singapore and economic powerhouse Germany are attending, but so too are isolated, impoverished Myanmar and landlocked, authoritarian Laos.

On Thursday, politics threatened to complicate matters as well.

In a sign of Europe's enduring political differences with China, the European Parliament on Thursday awarded the EU's top human rights award to Chinese dissident Hu Jia, despite a warning from Beijing that his selection would seriously harm relations.

Charles Tannock, Conservative foreign affairs spokesman in the European Parliament, said awarding the Sakharov Prize to Hu shows EU lawmakers would continue to highlight the "authoritarian and repressive nature of the communist government" in China, now the EU's biggest trading partner.

Chinese Foreign Ministry spokesman Liu Jianchao said China expressed its "strong dissatisfaction to the decision by the European Parliament to issue such an award to the jailed criminal in China, in disregard of China's repeated representations."

But Liu also indicated that the award would not derail attempts to make progress on financial issues.

French President Nicolas Sarkozy has pledged to use the ASEM meeting to persuade Asian nations to sign up to a plan to redraw the rule book for international capitalism, calling for a global system of regulation.

Liu echoed the need for changes to the current system.

"We need to explore the possibilities of reforming the international economic structure ... (to) stabilize the international financial markets, and ensure the stable operation of the international economy," he said.

China and other Asian economies are expected to take a major hit from a drop in exports and foreign investment, even though their banks had less direct exposure to the toxic sub-prime mortgages that are wreaking havoc on U.S. and European markets.

The EU has put up euro1.7 trillion (US$2.3 trillion) in guarantees and other emergency measures to save the banking system.

The vice president of one of China's main state-owned lenders said he expected the crisis to start to bite over the next six months.

"We shouldn't think this is going to be over soon. The key issue for Asian countries is to prevent the banking crisis from turning into a currency crisis," the Bank of China's Zhu Min said in remarks to the Asia-Europe Business Forum in Beijing.

"This is going to be a long and cold winter," Zhu said.

Even before the crisis hit last month, China's juggernaut economy was beginning to slow. Growth in the third quarter of this year was 9.9 percent, down from 11.9 percent for all of 2007. The World Bank says a further retreat is expected next year.

One of the hardest-hit countries, Pakistan, has sought help from the International Monetary Fund to avoid defaulting on billions of dollars in loans and skirt a financial crisis brought on by high fuel prices, dwindling foreign investment and soaring militant violence.

South Korea's stock market, meanwhile, has slumped to a three-year low amid heavy selling by foreign investors.

Leaders from 10 southeast Asian countries plus China, Japan and South Korea were due to hold a breakfast meeting Friday where the global financial situation would likely to be discussed, Chinese Foreign Ministry spokesman Qin Gang said.

"We hope that leaders from Asian and European countries will take this opportunity to fully exchange views on how to strengthen coordination, cooperation in dealing with this issue. And we hope their discussion will be fruitful," he said.

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Associated Press writer Henry Sanderson and researcher Bonnie Cao in Beijing contributed to this report.