'The crisis was not a failure of the free market system. And the answer is not to try to reinvent that system,' Mr Bush said in a speech laying out his agenda for a G20 summit on Friday and Saturday in Washington.

'Our aim should not be more government. It should be smarter government,' he said. It would be 'a terrible mistake to allow a few months of crisis to undermine 60 years of success'.

The remarks came just two months before Mr Bush steps down on January 20 and president-elect Barack Obama inherits what some are calling the worst economic meltdown since the Great Depression of the 1930s.

Four months after explaining the crisis by joking that 'Wall Street got drunk', Mr Bush rejected any effort to blame weak US regulations for the international meltdown he said 'ignited' when the US housing bubble burst.

'Many European countries had much more extensive regulations and still experienced problems almost identical to our own,' he said. 'We must recognise that government intervention is not a cure-all.'

Washington's European partners, led by French President Nicolas Sarkozy, who holds the European Union's rotating leadership, have sought tighter regulations and a top-to-bottom reform of international financial regulatory bodies.

Mr Bush has said it will be up to his successor to undertake any major overhaul of US rules - without which a serious reworking of global regulations would likely be impossible.

'The leaders attending this weekend's meeting agree on a clear purpose: To address the current crisis, and to lay the foundation for reforms that will help prevent a similar crisis in the future,' Mr Bush said.

'We also agree that this undertaking is too large to be accomplished in a single session. The issues are too complex. The problem is too significant to try to solve or to come up with reasonable recommendations in just one meeting.'

Created in 1999, the Group of 20 richest economies and emerging heavyweights accounts for 85 per cent of the world economy and about two-thirds of its population.

Its members are the United States, Germany, Japan, France, Italy, Britain and Canada, the European Union, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.

International Monetary Fund and World Bank officials are also due to attend.

Amid calls for enhancing the role of those international institutions, Mr Bush said both must 'reform' and 'modernise' the way they make decisions.

'They should consider extending greater voting power to dynamic developing nations, especially as they increase their contributions to these institutions,' he said.

The president also defended working with the US Congress to craft a US$700 billion (S$1 trillion) bailout of troubled US banks from charges of putting the US economy on a socialist drift.

'I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown,' he said.

'There's going to be difficult days ahead. But the United States and our partners are taking the right steps to get through this crisis,' he said, warning: 'It's not going to be solved overnight.'

With many looking to blame a lax US regulatory system for the meltdown, Mr Bush said 'outdated regulatory structures and poor risk management practices' had particularly hurt large international financial institutions.

Mr Bush called for improving accounting rules for securities so that their 'true value' is clear, requiring that credit default swaps go through centralised clearinghouses rather than 'over-the-counter' markets, taking new steps against market manipulation or fraud.

He also called for harmonising laws among nations. -- AFP