Leaders of the four largest European economies have urged financial institutions to boost transparency and better monitor risks, otherwise face stricter government regulations to prevent a global recession.

"We need a better early warning system for the global economy," said UK prime minister Gordon Brown on Tuesday (29 January), according to the BBC.

He was hosting a meeting in London to discuss the current global market turbulence attended by German Chancellor Angela Merkel, French President Nicolas Sarkozy, the outgoing Italian prime minister, Romano Prodi, and European Commission President Jose Manuel Barroso.

The meeting was called with the aim of coordinating the countries' various positions ahead of the G7 meeting of the world's leading industrialised nations in Japan in February, set to be dominated by discussion over the recent turbulence in bourses around the world and the collapse of mortgage markets.

Banks across the globe have been reporting massive losses related to risky investments in the US housing market, causing concerns over a possible American recession and the negative impact this would have on other regions.

"We must rebuild confidence and increase the transparency of financial markets, institutions, and the instruments they trade by," the leaders said in a joint statement, indicating that they prefer to resolve any problems by "market-led solutions" such as codes of conduct.

However, they added: "If market participants prove unable or unwilling to rapidly address these issues we stand ready to consider regulatory alternatives."

"We want the kind of capitalism that promotes entrepreneurship, not speculation," Mr Sarkozy commented, adding "We can't let this lack of transparency jeopardise growth."

While stressing "the fundamentals of the European economies remain strong with employment still rising," the participants at the London meeting also expressed concerns over predictions for further declines this year.

The European Commission is expected to lower its economic-growth forecast in February, after having revised it slightly for the 15-strong eurozone last November to 2.2 percent of GDP and for the 27 EU member states as a whole to 2.4 percent of GDP.