France and Germany issue summit warning

“Germany and France will speak with one and the same voice,” the French President declared.

“These are our red lines.”

Meanwhile a day of protests saw masked anarchists smash their way into a Royal Bank of Scotland branch in the City of London, although the fears of mass violence largely failed to materialise.

The hard-line position taken by Paris and Berlin, is potentially a major stumbling block for British Prime Minister Gordon Brown’s hopes of hammering out a deal to get the global economy back on track.

Earlier, an upbeat Mr Brown – flanked by US President Barack Obama - confidently predicted that they were “within a few hours” of agreeing a comprehensive global plan for economic recovery and reform.

However, as the leaders prepared to assemble for a working dinner at No 10, Downing St acknowledged that there was still more work to be done if they were to reach a deal.

“We are making good progress but we are not there yet,” Mr Brown’s spokesman said.

“There are still a number of issues to be ironed out. I think there is emerging consensus, but not everything is yet pinned down.”

At their news conference, Mr Sarkozy and Mrs Merkel insisted that there had to be “hard and fast results” on tax havens, hedge fund regulation, banking transparency and a worldwide cap on bankers’ pay.

“This is a historic opportunity afforded us to give capitalism a conscience, because capitalism has lost its conscience and we have to seize this opportunity,” Mr Sarkozy said.

Mrs Merkel added that they were united on the need to lay the foundations of a new global financial architecture.

“We simply cannot afford to remain vague on these fundamentals for a new architecture,” she said.

Mr Sarkozy angrily dismissed accusations of grandstanding over an earlier threat to walk out of the summit if the issue could not be resolved.

“This has nothing to do with ego, this has nothing to do with temper tantrums. This is to do with whether we are going to be up for the challenges ahead or not,” he said.

Earlier, at his press conference with Mr Obama held amid the splendour of the Foreign Office’s Locarno Room, Mr Brown felt able to make a joke about Mr Sarkozy’s walk-out threat.

“I’m absolutely confident that President Sarkozy will not only be here for the first course at our dinner, but still be sitting as we complete our dinner this evening,” he said.

He added: “We are within a few hours, I think, of agreeing a global plan for economic recovery and reform.

“Of course it is difficult and of course it is complex – we have a large number of countries – but I am very confident that people not only want to work together but we can agree a common global plan for recovery and reform.”

Mr Obama was in an emollient mood, saying that he had come “to listen and not to lecture” while acknowledging America’s role in the current financial crisis.

“If you look at the sources of this crisis, the US certainly has some accounting to do with respect of a regulatory system that was inadequate to the massive changes that had taken place in the global financial system,” said.

However he rejected suggestions that it was now the “Anglo Saxons” – the US and Britain – who were holding out against reform of the international financial system.

“The notion that somehow there are those pushing for regulation and those resisting regulation is belied by the facts,” he said.

He warned that failure to reach agreement tomorrow would have grave consequences for all the countries concerned.

“History shows us that when nations fail to co-operate, when they turn away from one another, when they turn inwards, the price for our people only grows. That is how the great depression deepened. That is a mistake we cannot afford to repeat,” he said.