German chancellor Angela Merkel said she would welcome the creation of a European rating agency as a "competitor" to US-based rating agencies.
In an address at a Berlin conference on financial rules one day after enacting a unilateral ban on some naked short-selling, Dr Merkel reached out to financial markets ahead of tomorrow's vote on Germany's share of a $1 trillion euro bailout, saying she needed "honest" advice as she pressed for tougher global regulation.
She insisted that policymakers had to balance voter concerns with investors' "understandable" desire for profit. While she said she's committed to holding the 16-nation euro area together, politicians are "no financial experts".
"People are asking, 'What powers do you politicians still have?'" Ms Merkel said.
The G20 nations agreed every product, every actor and every financial centre must in future be regulated, she said.
"That's what we promised the people. Now, one-and-a-half or two years later, people are asking what happened. At some point we have to deliver."
Dr Merkel's speech contrasts with her previous condemnation of "destructive" markets and is her first attempt to explain the reasoning behind her decision to curb government-bond trading.
The ban left her isolated as she pushes for a crackdown on euro-area states that flout budget-deficit rules and seeks lawmakers' backing for Germany's share of as much as €148 billion to backstop the euro.
The euro slid again today after the unilateral German move to ban naked short selling on some instruments exposed political divisions in Europe and stoked fears of tighter financial regulation.
Underscoring those splits France, French economy minister Christine Lagarde said it did not share the view of Dr Merkel who yesterday said the euro was in danger.
"I absolutely do not think that the euro is in danger," French economy minister Christine Lagarde told RTL radio today. "The euro is a solid and credible currency."
China said the euro crisis - fuelled by Germany's move to stamp on speculators - was adding to global uncertainties, a factor underlined by fresh weakness in stock markets.
Naked short selling involves selling a financial instrument without first borrowing the instrument or ensuring that it can be borrowed, as would be done in a conventional short sale.
The common currency has been under intense pressure for months as concerns over Greece's heavy debts have cast doubt on the euro zone's ability to pull fiscally weak EU countries out of the mire.
Greece braced for a 24-hour general strike today in protest against the tough austerity measures demanded by the European Union and the International Monetary fund in exchange for a €110 billion bailout.
Jean-Claude Juncker, chairman of the Eurogroup forum of euro zone finance ministers, said the weakness in the euro, down more than 7 per cent against the dollar in the past month alone, was likely due to fears that economic growth in the 16 countries that share the currency will slow.
But markets were acting irrationally, he said.
"There are expectations that growth is slowing down because of the deficit cuts we have to take," Mr Juncker said in Tokyo. "There is a certain reluctance to believe the Greeks can overcome the current crisis. I don't think the markets are behaving in a rational way."
The euro rebounded late yesterday as traders covered short positions on speculation European monetary officials might move to check its rapid fall.
Mr Juncker, speaking to reporters after meeting Japanese finance minister Naoto Kan in Tokyo, said he did not see the need to take immediate action on the euro's rapid plunge but said central banks were in close contact.
"Monetary authorities are monitoring closely exchange rate developments and they best know what to do. I'm concerned because the rapidness of the fall in the euro is impressive. I'm not concerned as far as the current exchange rate is concerned."
The instability is worrying China though, which called for an international response.
"The European sovereign debt crisis is a challenge not just for the countries that are party to it, such as Greece. In fact, it is a challenge to the stability of the entire international financial market," said assistant finance minister Zhu Guangyao.
"It concerns the recovery of the entire international economy, and so it demands a common response from the international community," he said.