PARIS - REGULATION of global markets must be tightened up to improve efficiency, the OECD said on Wednesday while urging governments to work harder to support growth during the downturn.

The Organisation for Economic Cooperation and Development, one of the main forums for policy making among 30 leading advanced countries, said it would put forward a two-pronged programme in response to the global financial crisis and ensuing downturn.

The head of the OECD, Mr Angel Gurria, speaking at a conference in Brussels, also said risks had to be more tightly controlled, and made implicit reference to controversial commission incentives for highly paid traders and others in the financial sector.

In remarks made available here just days after the OECD warned of a deepening economic slowdown, Mr Gurria said: 'The causes and consequences of this crisis are rooted in a wide set of inter-related policy areas and can only be addressed through integrated responses.'

He said the OECD's wide-ranging plan, covering such areas as financial regulation, corporate government, fiscal and employment policy and pensions, would broadly target two areas.

'First, align regulations and incentives in the financial sector so that market operators act in a tighter oversight and risk management environment,' Mr Gurria said.

'Second, review and upgrade national policies and improve policy coordination at the international level to restore the conditions for economic growth.'

The importance of efficiently functioning markets was one key lesson from the financial crisis, Mr Gurria said.

He said: 'Automatic fiscal stabilisers are already helping to cushion the downturn, especially in Europe, but more needs to be done.'

Governments should be more active in such areas as job retraining and helping those who risk losing their homes.

And he urged governments not to lose sight of other commitments and policy objectives, notably in fighting poverty, inequality and climate change.

Mr Gurria also called for fresh interest rate cuts in developed countries, predicting that they were headed for 'flat or negative' economic activity in 2009.

In a report on Friday, the OECD said its composite of leading indicators (CLI) for September pointed to a deepening slowdown in the economies of its 30 member states.

It also said the findings for the Group of Seven most industrialised countries suggested 'a continued weakening outlook ... with cyclical slowdowns at levels not seen since the beginning of the decade'. -- AFP