European leaders meeting in Berlin at the weekend have backed oversight of the world's financial markets and products, including hedge funds, and urged that sanctions be drawn up to punish tax havens, according to Reuters.

A copy of the "chair's summary" from a summit hosted by German chancellor Angela Merkel and seen by the news service describes the situation in financial markets as "fraught" and says structural reforms and a focus on public spending are needed to emerge stronger from the global crisis.

Meanwhile, UK finance minister Alistair Darling turned up the heat on Switzerland and its centuries-old traditions of bank secrecy in a newspaper interview yesterday.

So-called tax havens and investment vehicles such as hedge funds have been criticised by politicians and some commentators for their role in the current financial crisis. However, defenders of jurisdictions levying low taxes or no taxes on certain activities argue that the designation of “tax haven” is arbitrary and that many such jurisdictions are as transparent as more supposedly mainstream financial centres. Meanwhile, governments in countries such as the US and UK have already moved to restrict hedge funds’ use of techniques such as short-selling. However, some analysts argue that such restrictions are unwarranted and counter-productive in the long run.

The statement by European leaders said: "We have today underscored once again our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk."

The statement also urges definitive actions against tax havens and uncooperative jurisdictions.

"According to objective criteria to be based on ongoing work in relevant international institutions, a list of uncooperative jurisdictions and a toolbox of sanctions must be devised as soon as possible," the statement says.

Ms Merkel invited the leaders of Britain, France, Italy, Spain, the Netherlands, Czech Republic and Luxembourg, as well as the European Commission president, finance ministers and European central bankers to prepare a common stance ahead of a full G20 meeting in London on 2 April.

Since a first G20 summit on reforming the global financial architecture was held in Washington late last year, recessions in Europe and the United States have deepened, forcing governments to push through massive stimulus packages.

The Berlin meeting takes place after a week of accusations of protectionism between European nations, with some of France's partners objecting to its plans to offer €6 billion in state loans to domestic carmakers.

In the final statement, the leaders commit to implementing stimulus measures and financial rescue plans in a manner that "limits distortions to competition to an absolute minimum."

In an interview with the Observer newspaper, the UK's Mr Darling, said transparency was essential and its lack was a major contributing factor to the global credit crunch and criticised Swiss banking secrecy.

UBS last week agreed to pay a $780 million fine to conclude a US criminal investigation into the Swiss bank's alleged role in helping US wealthy clients avoid paying US taxes. A civil action in which UBS is being asked by tax authorities to hand over client details is still ongoing. UBS is refusing to hand over details on up to 52,000 clients.

"I think it's important there is transparency. People don't know what's going on. That's not good. Indeed, half the many problems we have got now is because people didn't know what was going on," Mr Darling told the newspaper.

"It's one of the things Switzerland has got to address. If it wants to be part of the international community, it's got to be open. The secrecy that allows people to shelter their wealth from tax that's properly paid - you can't tolerate that," Mr Darling said.

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