European Central Bank President Jean-Claude Trichet said today that the world leaders' call for a regulatory overhaul of the financial system was "everything we need to restore confidence."

Leaders from the Group of 20 major world economies said yesterday at their London summit that they would widen financial oversight and discourage excessive risk-taking to prevent a repeat of the crisis in the banking system that has crippled lending, trade and business activity.

"These decisions need to be implemented as swiftly as possible," Trichet told reporters after meeting with finance ministers from the 16 nations that use the euro. "Speed is of the essence and flawless implementation is of the essence now."

France and Germany were also upbeat about the results of the G-20 summit, with French Finance Minister Christine Lagarde saying the leaders' compromise would help "profoundly change some of the dysfunctions of the financial system."

German Finance Minister Peer Steinbrueck greeted it as "a breakthrough" that will plug regulatory loopholes in the financial system and made "massive steps forward" on agreeing sanctions against tax havens and banking secrecy.

European Union finance ministers will start work later Friday during two days of talks on how they should fix their troubled economies and on a wide range of new rules they are planning for the 27-nation EU that will mean closer supervision for banks and tighter regulation of hedge funds, private equity, credit rating agencies and even executive pay.

Talk of any new government spending to create economic stimulus is currently off the table as EU nations fix targets for when they will pay off the debt they are already accumulating to finance existing tax breaks and social welfare.

Euro-zone ministers told Ireland and Greece, which have troubled state finances, to start government cutbacks this year to limit their surging deficits - a tough task as tax revenue falls and leaving neither with any room to spend and stimulate their economies.

Trichet claimed the strict budget rules designed to support the euro currency weren't a straitjacket for recession-hit countries, saying euro membership was overall "a formidable help which should not be underestimated."

"We are refinancing in an unlimited fashion at fixed rates Irish commercial banks," he said. "There is considerable solidarity at the level of the euro area."

Euro nations agreed that France and Spain could start tightening their belts next year after trying to stoke growth with tax breaks this year.

All four countries are running deficits above an EU limit of 3 percent of gross domestic product that aims to keep their shared currency stable.

EU officials acknowledge that Europe's economy is now slowing more than expected.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said shrinking trade and industrial output were hiking jobless rates and that economic output for the first quarter this year "will not be positive."

An improvement in household spending was largely cosmetic, he said, and "probably helped by very low prices."

Trichet said falling prices - compared to a year ago when oil and food costs rocketed - would help return some money to shoppers' pockets and could provide an extra prop to the economy.