London  - German Chancellor Angela Merkel and French President Nicolas Sarkozy threw down the gauntlet Wednesday and challenged the Group of 20 (G20) big economic powers to agree to tough new reforms for global financial markets.

"We don't want results that won't have a practical effect," said an unusually combative Merkel at a joint press conference with Sarkozy ahead of Thursday's summit in London of the leading industrialized nations and emerging economies.

Leaders on both sides of the Atlantic have spent days playing down divisions between the G20 leaders, notably over the need for economic stimulus packages.

Merkel and Sarkozy's rattling of sabres ahead of Thursday's summit come as officials try frantically to finalise the details of a likely agreement between leaders representing 85 per cent of world economic activity.

Merkel has spearheaded European resistance to throwing more money at the global recession, arguing that it will take some time for the measures already introduced to take effect and that the focus should now be on financial reform.

Sarkozy said the establishment of a blacklist of tax havens was an absolute must.

"This is an historic opportunity to moralise a system which has become immoral," the French leader said, adding that the only question was whether such a list was drawn up during the summit or shortly thereafter.

The leaders also took turns with their demands for hedge fund regulation, tougher guidelines for bonus payments, and the need for banks to take greater responsibility for the debt they sell on.

"We speak with one voice," Sarkozy said of the two leaders.

The German chancellor added that the world could not afford to wait for a third G20 summit to come up with new rules to govern financial markets.

Sarkozy said he had confidence in US President Barack Obama and the agenda for change that the had been voted in on. "I am sure he will understand us," the French president said of his American counterpart.

The London summit is only the second time that the G20 leaders have met in the organization's decade-long history. They last met in Washington in November.

The French President also appeared to back away from previous remarks that he would walk out on the summit if it failed to agree to a new tough set of financial market reforms.

He told reporters that after having just arrived it would be pity if he left now.

Both Sarkozy and Merkel have campaigned for beefing up global financial market supervision and closing the gaps in the regulatory net to take in areas such as hedge funds and tax havens.

The London summit, said Sarkozy, represented "a real chance of making progress on market reforms."

Merkel warned that steps needed to be taken now to head off the threat of fresh crises in the future.

The chancellor added that world leaders needed to communicate a clear message around the globe.

"Something disastrous has happened in the world," Merkel said. "During all our efforts to get out of this crisis, we mustn't forget how we got into it."

Sarkozy echoed the chancellor's sense of urgency, saying that the time to fix the global economy was today and tomorrow.

"The day after tomorrow is too late," the French president added in a characteristic display of drama. (dpa)