Paris - The blast of recession hit Europe on Friday as leaders from more than 20 rich and emerging countries headed for a crisis summit in Washington and OPEC called a special meeting on slumping oil prices.
The EU announced that the 15 eurozone countries were in recession for the first time ever, with a 0.2% contraction in the third quarter after a similar downturn in the previous quarter.
The economies of all 27 EU countries contracted by 0.2% in the third quarter, escaping recession only because second-quarter growth was zero and not negative.
Another sign of the brutal economic climate came from the Organisation of Petroleum Exporting Countries which said it would hold a special meeting in Cairo on November 29 to discuss how to respond to the slump in prices.
Some members want a new production cut to hold prices up despite the acceleration this might give to the downturn.
With nearly all of Europe now in recession and European car-makers reporting a 14.5% sales slump in October, pressure grew on world leaders ahead of their summit to discuss how to stop the financial crisis becoming a prolonged recession.
French President Nicolas Sarkozy, European Commission head Manuel Barroso met Russian President Dmitry Medvedev in Nice, France, to work on proposals for the summit.
Japan said it would lend up to $100bn to the International Monetary Fund to help it shore up emerging countries.
Japan also threw its weight behind calls for IMF reforms including giving greater influence to China, and said it would support the dollar as the main global currency despite the weight of US debt.
Global stocks rallied despite the new bad news. After a 6.67% leap on Wall Street overnight, shares in London opened with surge of 3.9% and the Tokyo market closed with a gain of 2.72%.
The Washington summit starts with a dinner Friday night to start discussions on drawing up new rules for the global economy.
Tensions
But tensions appeared with the European Commission warning that it could take action at the World Trade Organisation if a rescue package for US auto majors appeared illegal.
The outgoing US president George W. Bush declared that "the crisis was not a failure of the free market system" and that "our aim should not be more government. It should be smarter government."
Bush argued that it would be "a terrible mistake to allow a few months of crisis to undermine 60 years of success" in response to calls from many quarters, including France, for extended rules and regulations for economies and boardrooms.
"Many European countries had much more extensive regulations and still experienced problems almost identical to our own," Bush said. "We must recognize that government intervention is not a cure-all."
However, Sarkozy, current president of the European Union, said on Thursday: "I leave for Washington tomorrow to explain that the dollar, which at the end of World War II was the only world currency, can no longer claim to be the sole world currency."
"The world changes. We are in the 21st century and the French view is that we cannot continue into the 21st century with a system (established) in the 20th century," he said.
The Organisation for Economic Cooperation and Development said on Thursday that its 30 rich member economies were in protracted recession, and said the US economy would contract by 2.8% in the fourth quarter.
In this rapidly worsening climate, French Economy Minister Christine Lagarde said it was "astonishing" that France had escaped recession in the third quarter, as shown by official data putting growth at 0.1% after contraction of 0.3% in the second quarter.
The benchmark price of oil fell by 82 cents to $57.42 a barrel in London and the Brent North Sea oil price fell by 99 cents to $55.25.
The International Energy Agency had reported on Thursday that global oil demand is falling rapidly because of the recessionary pressures in the economy.
- Sapa-AFP