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He pledged to reduce the US nuclear stockpile, and urged others to do the same. But as long as a nuclear threat existed, the US would retain its nuclear capability, although it would work to reduce its arsenal.

He said his administration would work to bring the Comprehensive Test Ban Treaty (CTBT) into force in order to achieve a global ban on nuclear testing. The agreement would ban all nuclear explosions for any purpose, but cannot currently come into effect as nuclear powers such as the US and China have not ratified it, and India and Pakistan have not signed it.

The most immediate and extreme threat to global security, the president said, was the possibility of terrorists possessing nuclear weapons.

"Al-Qaeda has said it seeks a bomb. And that it would have no problem in using it. And we know that there is unsecured nuclear material across the globe." Mr Obama announced a new effort to secure sensitive nuclear material within four years and break down the black market in the trade in illicit weapons.

He also said he would negotiate a new strategic arms reduction treaty with Russia by the end of this year. The speech came days after he and Russian President Dmitry Medvedev - meeting on the sidelines of the G20 summit in London - agreed to reopen negotiations about reducing nuclear warheads. They aim to produce a new arms control treaty to replace the Strategic Arms Reduction Treaty (Start) that expires at the end of the year.

"As long as the threat from Iran exists, we will go forward with a missile defence system," he said.

More significantly from a European perspective, the US agreed to significantly strengthen international oversight of financial markets, with particular attention paid to tax havens, hedge funds and ratings agencies.

It was a move that both Merkel and French President Nicolas Sarkozy insisted upon -- and one which will go a long way toward removing whispers of friction between Obama and Merkel.

Not only did the president pledge a renewal of trans-Atlantic relations -- he also said that he seeks to create a world free of nuclear weapons. "This weekend in Prague," he said, "I will lay out an agenda to seek the goal of a world without nuclear weapons."

"In Europe, there is an anti-Americanism that is at once casual, but can also be insidious. Instead of recognizing the good that America so often does in the world, there have been times where Europeans chose to blame America for much of what's bad…. On both sides of the Atlantic, these attitudes have become all too common. They are not wise."

At the Afghanistan Conference in The Hague earlier this week, Obama was careful not to make any concrete demands for more troops from his European NATO allies. But on Thursday, he seemed willing to tighten the screws slightly. In addition to warning that al-Qaida still posed a threat, he also said, referring to Afghanistan, that "Europe should not simply expect the United States to shoulder the burden alone. This is a joint problem that requires a joint solution."

The response from Sarkozy, who was standing right next to Obama, was swift. "There will be no French military enforcements," the French president said. "We are ready to do more in the field of policing, of gendarmes, in the field of economic aid, to train Afghans."

Other NATO countries on Friday, though, said that they would be willing to send more troops. SPIEGEL ONLINE learned from diplomats attending the NATO summit that British Prime Minister Gordon Brown intends to send several hundred more troops to Afghanistan. Both Belgium and Spain are likewise promising more soldiers, though Spain is reportedly planning to send just 12 additional troops.

At Obama's first meeting with Dmitry Medvedev, Russia's president, in London on Wednesday, both agreed on fast-track negotiations to slash their nuclear stockpiles by about a third from the end of this year

Obama would use the speech to urge the US Senate to ratify the comprehensive test ban treaty proscribing nuclear bomb trials, a treaty already endorsed by the other main nuclear powers, Russia, Britain, and France. The US has about 10,000 of the world's estimated 24,000 nuclear weapons, and Russia 13,000.

John Hutton, the defence secretary, told the Guardian Britain could despatch up to 1,000 more soldiers this summer, and Nato officials were confident that Europeans would supply up to a further 3,000.

Obama made it plain yesterday that the chances of a better transatlantic relationship hinged on European readiness to "step up to the plate" in Afghanistan and to "share the burden" for his surge.

"It is important for Europe to understand that even though I am president and George Bush is not president, al-Qaida is still a threat," Obama said. "I've come to Europe this week to renew our partnership ... America is changing but it cannot be America alone that changes." He warned that the risk of an al-Qaida attack was higher in Europe than in the US.

"I don't think the hard end of the security mission is being properly shared, and that is the view of many others including the president," said Hutton. "Europe has got to see al-Qaida is every bit a direct threat to Europe and the UK, as it is to the US." He said Nato could no longer use its dislike of Bush to avoid a commitment in Afghanistan.

The contrast is striking. Only four years ago, George W. Bush, in his second Inaugural Address, described what he called America's "considerable" influence, saying, "We will use it confidently in freedom's cause." Bush's vision of American power was combative and aggressive. He said the U.S. would "seek and support the growth of democratic movements and institutions in every nation and culture." He continued, "We go forward with complete confidence in the eventual triumph of freedom."

Obama, by contrast, is looking for collaboration. He is looking to build a collective vision, not to impose an American one.

They want to focus on tougher regulation of the financial community. They want the summit to start re-writing the global rulebook on capitalism.

The intriguing thing is that the economic crisis and Brown's lining up with Obama, who has proclaimed his belief in the enduring "special relationship" with Britain, has revived the Franco-German alliance which used to dominate EU affairs and which had seemed to wither under Merkel and Sarkozy. She doesn't like his touchy-feely ways, he finds her incremental style of politics frustrating. They had drifted apart, but they are back sharing a political tent.

The big question on the fiscal stimulus front is: What will China do?

Brown's hope is that China, worried about the safety of its money invested in the U.S., will be ready to commit extra funds to fighting the world recession. But if he agrees to do so, President Hu Jintao will surely exact a price.

If China comes up with the money to help, it will need assurances that it will in the future enjoy greater power within such multilateral institutions as the IMF and the World Bank. The U.S. and Europe, who have dominated the G-8, now have little option too but to accept a new world order.

Whatever the outcome in London it is unlikely now that the G-8 alone will ever carry the same sway. And not surprisingly, Italian Prime Minister Silvio Berlusconi, who hosts this summer's G-8 in Sardinia, has proposed that its gathering should be immediately followed by one of the G-20.

Clinton had pressed for Iranian participation in The Hague conference, stressing the importance of finding a regional solution to the insurgency in Afghanistan and Pakistan, and western officials were encouraged that Akhundzadeh, a deputy foreign minister and former charge d'affaires in London, was sent by Tehran.

Akhundzadeh told ministers from more than 70 countries at the meeting: "Welcoming the proposals for joint co-operation offered by the countries contributing to Afghanistan, the Islamic Republic of Iran is fully prepared to participate in the projects aimed at combating drug trafficking and plans in line with developing and reconstructing Afghanistan."

He repeated Tehran's criticism of the Nato role in Afghanistan, but used relatively moderate language, saying: "The presence of foreign forces has not improved things and it seems that an increase in the number of foreign forces will prove ineffective, too."

Akhundzadeh added: "The military expenses need to be redirected to the training of the Afghan police and army and Afghanisation should lead the government building process" - an apparent nod towards the Obama administration's decision to send 4,000 more American military trainers.

Western officials expressed hopes that the west and Iran could return to the close co-operation over Afghanistan that took place in the months after the 9/11 attacks. Iranian officials even helped the US target the Taliban, but the relationship cooled after Bush's "axis of evil" speech.

"There is a meeting of minds on drugs, development issues and the [August Afghan] elections, though not on foreign troops, on which they made clear their objections."

Malloch Brown acknowledged that Iran had done some "bad things" in both Afghanistan and Iraq, supplying weaponry to insurgents that had been used against British soldiers.But he argued: "This is Iran supporting its proxies because of a lack of diplomatic partnership around Iraq and Afghanistan. If this is a rapprochement, whether it is overall rapprochement or just aimed at stabilising Afghanistan, it offers the prospect of this behaviour getting moderated and hopefully stopping."

Vague low-carbon language and climate change negotiations in Copenhagen in December were relegated to two paragraphs at the communique's end.

Some critics also pointed out that the summit failed to produce a co-ordinated plan to purge the global banking system of billions of dollars of toxic assets, and suggested that regulation of the financial industry should have gone further.

Brown said that the existing agreed fiscal stimulus will amount to $5tn by 2010, and the measures will raise world output by 4% by the end of next year.

The prime minister also won agreement from other G20 world leaders that the International Monetary Fund will monitor the existing stimulus,

Overall, the resources of the IMF will be trebled from $250bn to $700bn, following the lifting by the US of years of opposition. In a sign of the shift in world power, China agreed to provide $40bn of the new loans given to the IMF, with more to come from Saudi Arabia.

At the centre of the deal was a six-point plan:• Reform of the global banking system, with controls on hedge funds, better accounting standards, tighter rules for credit rating agencies, and immediate naming-and-shaming of tax havens that fail to share information.• A global common approach to dealing with toxic assets that impair the ability of banks to lend.• A $1.1tn package to supplement the $5tn stimulus to the global economy by individual countries. The $1.1tn will allow the IMF, the World Bank and others to increase lending to vulnerable countries. There will be a tenfold increase to $250bn in the IMF's facility allowing members to borrow from other countries' foreign currency reserves.• More power for leading developing countries within the IMF and World Bank, to end the stranglehold of the US and Europe on their top jobs.• $200bn of trade finance over two years to help reverse the steepest decline in world trade since 1945, with cash from a range of public and private sources.• A pledge that the fiscal stimulus, including the sale of gold by the IMF due to raise $6bn, will give help to the poorest nations and create green jobs.

Nicolas Sarkozy said the summit meant that the era of secrecy by banks was over; "great progress" had been made, he said, and the page had been turned on the economic model which had dominated since Bretton Woods in 1944 created the world's institutional framework."Since Bretton Woods, the world has been living on a financial model, the Anglo-Saxon model. It's not my place to criticise it, it has its advantages [but] clearly today a page has been turned," he said.

The summit's biggest loser may have been the fight against climate change. Diplomatic sources said China led the opposition to green language in the final communique. David Norman, the WWF campaigns director, claimed that the summit had been "a huge missed opportunity".