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Latest update : 2008-10-24

As the Asia-Europe summit (ASEM) in Beijing opened amid fears of economic turmoil on Friday, 13 East Asian nations agreed to create an $80 billion joint fund to face the financial crises in their region.

View our special report: 'The crisis hits Main Street'



East Asian leaders pledged on Friday to create an 80-billion-dollar fund to help combat the financial crisis, amid a hectic round of diplomacy with their European colleagues on day one of a summit.
The agreement, between South Korea, China, Japan and the 10 members of the Association of Southeast Asian Nations, was the first major coordinated regional action since the financial turmoil reached full force last month.
"They expressed their willingness to enhance coordination and cooperation and to make joint efforts to prevent and withstand the crisis," said a statement released by China on the official website of the Asia Europe Meeting.
The two-day ASEM summit, bringing together 43 leaders from the two regions, opened amid heavy security at the Great Hall of the People in Beijing with the economic turmoil the top item on the agenda.
But the leaders engaged in a flurry of one-on-one and group meetings, such as the one by the leaders of the 13 East Asian nations, ahead of the official proceedings in which a vast array of issues aside from economics were covered.
Chinese President Hu Jintao had a host of meetings with world leaders, including French President Nicolas Sarkozy, German Chancellor Angela Merkel and Japanese Prime Minister Taro Aso.
The encounter with Aso had immediate benefits for the Asian nations, which have endured decades of tensions, with the leaders agreeing to set up a direct hotline between them, a Japanese official said.
Ties between China and Germany also appeared to have emerged stronger from the Hu-Merkel meeting, after the German chancellor deeply angered the Chinese government by meeting Tibetan spiritual leader the Dalai Lama last year.
"At the present time, the overall development of Chinese-German relations is good," state-run TV quoted Hu as telling Merkel.
But the agreement by China, Japan, South Korea and the 10 Southeast Asian nations on the Asian pool of foreign exchange reserves was the major development of the ASEM build-up.
The 80-billion-dollar fund would be created by the end of June next year, and be accompanied by an independent regional financial market surveillance organisation, according to South Korean President Lee Myung-Bak's spokesman.
However, no other party involved gave a firm timeline for when the fund would definitely be created, with officials pointing to further meetings between the so-called "ASEAN Plus Three" nations.
The "ASEAN Plus Three" fund would supersede the Chiang Mai Initiative, which came into being in 2000 in the wake of the 1997/98 East Asian financial crisis to ease mainly bilateral currency swaps.
The East Asian countries began talks in 2006 on transforming the Chiang Mai Initiative into a more powerful and multilateral reserve pooling mechanism.
Ahead of the forum, European Commission President Jose Manuel Barroso called for more help from Asian nations in fighting the worst economic meltdown since the Great Depression of the 1930s.
"We swim together or we sink together," Barroso said after arriving in Beijing.
"We need Asia to be on board, and more particularly countries like China, India (and) Japan."
Sarkozy, whose country currently holds the rotating presidency of the European Union, had also said he would use the summit to seek Asian backing for his bid to rebuild the world's financial system.
European governments have already committed more than two trillion dollars to banks and the money markets in a largely coordinated move to shore up their plummeting stock markets.
Before Friday, Asian governments had mostly limited their intervention to cutting interest rates, guaranteeing bank deposits and injecting money into the credit markets -- without the kind of coordinated action taken by Europe.

Date created : 2008-10-24