BRUSSELS (AFP) — Fears grew on Wednesday that the financial crisis will mutate into a worldwide recession with leaders calling for new global action against a slowdown.

As EU leaders gathered for a summit devoted to the financial turmoil, a top U.S. central bank official said the United States appeared to be already in recession.
Janet Yellen, president of the San Francisco Federal Reserve, said “virtually every major sector of the economy has been hit by the financial shock.”
She said recent data indicated there was “essentially no growth at all” in the world’s biggest economy and “growth in the fourth quarter appears to be weaker yet, with an outright contraction quite likely.”
Japan’s Prime Minister Taro Aso has already said he has “huge fears” for the future of the second biggest economy.
In Brussels, British Prime Minister Gordon Brown urged fellow EU leaders to unite against the underlying problems behind the financial crisis.
The first phase of the crisis has been ended with the stabilization of the financial system, Brown said.
Brown called for a complete overhaul of global financial regulations and institutions, such as the International Monetary Fund (IMF), as the world’s economy was now far more interdependent than ever before.
Governments announced more measures Wednesday to douse the financial storm.
European Union nations have already committed more than 1.8 trillion euros (2.4 billion dollars) to fighting the crisis by buying bank shares and providing loan guarantees to keep credit markets moving.
The United States has a 700 billion dollar rescue plan and the administration announced Tuesday that 250 billion dollars from that would be used to take stakes in nine major banks.
“This is an essential short-term measure to ensure the viability of America’s banking system,” President George W. Bush said. Acknowledging misgivings over the move, Bush said the government intervention was “not intended to take over the free market, but to preserve it.”
Recession is typically defined as two consecutive quarters of negative growth. The U.S. economy grew 2.8 percent in the second quarter, and third-quarter data are not expected until the end of October.
Worries about a worldwide slowdown and the crisis in the money markets have given global stock markets a battering this year. While there have been wild swings, all the main markets have suffered significant losses in 2008.
Share markets fell Wednesday though Tokyo was a bright spot, closing up 1.06 percent after Tuesday’s record 14 percent surge. But Hong Kong closed down 5.0 percent and in midday trade, London slid 2.95 percent, Frankfurt lost 2.07 percent and Paris was down by 2.18.