President Nicolas Sarkozy of France and senior EU officials welcomed Medvedev to the southern city of Nice for a four hour meeting, after which they were to jet off to the Washington summit.

Russia and Europe remain at loggerheads over Moscow's troop presence in Georgia, but Mr Medvedev and Mr Sarkozy, whose country holds the rotating EU presidency, have both called for reforms to the financial system.

'Russia is ready, together with the EU and other partners, to participate in working out the parameters of a new financial architecture,' Mr Medvedev told European and Russian business leaders on Thursday.

Mr Medvedev said the economic crisis would require 'reform of the international financial system and its great institutions, the International Monetary Fund and the World Bank.'

An official in Mr Sarkozy's office had noted that an exchange of diplomatic notes had revealed an 'overlap' in Moscow and Paris's ambitions. Mr Sarkozy has called for states to create what he calls a 'regulated capitalism'.

The French president has said the Washington meeting should seek to lay the groundwork for a complete overhaul of the financial system, an idea Russia was pushing even before the credit crisis erupted.

Europe now hopes that Russia's support will help push the United States into major changes - a move that is likely to meet stiff resistance in Washington.

'The crisis was not a failure of the free market system. And the answer is not to try to reinvent that system,' US President George W. Bush said in a speech laying out his agenda for the Washington summit.

While it seemed unlikely that Europe and Russia would arrive in Washington with a joint blueprint, the two sides were moving closer together.

Mr Medvedev and Mr Sarkozy have blamed US economic management for a credit crunch that has brought down banks around the world, put the squeeze on businesses and consumers and pushed national economies into recession.

Mr Sarkozy has called for the summit of more than 20 of the world's leading economies and emerging powers, to 'remake the world financial system", creating a so-called Bretton Woods II.

Bretton Woods was the name of the post World War II plan that saw the creation of the World Bank and the International Monetary Fund.

Moscow has lobbied for change in the running of these bodies and, in particular, for more weight to be given to representatives of the so-called 'BRIC' emerging nations, Brazil, Russia, India and China.

It was not clear how much detail of the EU and Russian ideas would emerge during Friday's meeting, but observers will watch for signs that the economic crisis has strengthened strained ties between Brussels and Moscow.

Many EU members, however, remain angered by Moscow's trampling on Georgian sovereignty after the Aug war, and will hold out against stronger ties for at least as long as Russia maintains reinforced garrisons there.

The leaders began their meeting at 10:30 am (5.30 pm Singapore time) at the Sarde Palace in Nice's historic old quarter, and were to hold four hours of talks before heading separately to Washington. -- AFP