LONDON (Reuters) - British Prime Minister Gordon Brown said on Tuesday the world economy was in a downturn but expressed confidence that the Group of Seven industrial countries will agree urgent action next week to tackle global financial turmoil.

Brown said leading world economies and international institutions urgently needed to act on the causes of the turbulence that has swept global financial markets as a result of the US sub-prime crisis.

There was now much common ground on what had to be done, he told a news conference. "I believe in the next few days we can agree some of these changes to the international financial system," he said. "We have got to make these changes immediately."

Finance ministers and central bankers from Britain, Canada, France, Germany, Italy, Japan and the United States are expected to meet in Washington on April 11 to seek a solution to the credit crunch. The International Monetary Fund meets afterwards.

"I believe the IMF, the Financial Stability Forum and the G7, which will be meeting in the next few days, will decide that first of all there has got to be far greater transparency and disclosure in financial markets," Brown said.

Britain would cooperate with the United States on tackling financial market problems. "Europe and America must work very closely together," he said.

Brown said he wanted the Financial Stability Forum (FSF) — a world economy watchdog comprising supervisors and regulators — to be in daily contact on what is happening in the markets and it should also hold regular ministerial meetings.

Steps as drastic as bank bailouts with taxpayers' money are among options being considered by the Swiss-based FSF in a report to G7 powers on what to do about the financial crisis, the Financial Times reported yesterday.

Brown said there had to be agreement on how the big financial institutions would write off losses which they had suffered as a result of the US sub-prime crisis.

"The sooner that is independently validated ... the greater will be the return of confidence to the economy. We need to do this at an international and not simply a national level," he said. He also called for a new approach to credit rating agencies.

Brown, finance minister for a decade before replacing Tony Blair as prime minister last June, said he was not looking for over-active regulation but simply "transparency so the markets can work as informed and educated markets in future."

Brown was keen to create the conditions allowing Britain's central bank leeway to cut interest rates to shore up growth.

"What I want to do is to make it possible for the Bank of England to cut interest rates, as they have, to make it possible for them to have all the options open to them in the future," he said. "That's why we are bearing down heavily on inflation."