BRUSSELS/LONDON - The European Union proposed on Wednesday creating regulatory bodies to oversee financial supervision across national borders in a shake-up to protect investors and prevent another global credit crunch.

The changes would tighten scrutiny of banks and create an early-warning system when risks build up. But they could face opposition from Britain, a major banking center, which resists any moves to reduce the powers of national regulators.

The proposals could also show before a European Parliament election that the 27-nation EU is making a concerted effort to improve supervision of the financial system following criticism of its response to the global economic crisis.

The measures we have taken to tackle the crisis are starting to work but ... the real economy also needs ethical and effective financial markets if it is to prosper, European Commission President Jose Manuel Barroso told a news conference.

Our measures will help establish confidence and restore demand for credit.

The proposals unveiled by the Commission, the EU's executive, are based on recommendations by former Bank of France Governor Jacques de Larosiere and are intended to help detect the start of a crisis faster.

They are intended to show the EU would be better prepared if another crisis developed like the present one -- which started over bad loans in the United States but quickly spread and has now pushed the EU into recession.

The plans call for creation of a European Systemic Risk Council, chaired by the European Central Bank and comprising central bankers and national regulators, to monitor risks.

A steering group would be created to oversee three new pan-EU authorities on insurance, banking and securities markets and ensure EU rules are applied consistently across the bloc.

Barroso made clear the EU needed to act now, before the EU emerges from crisis and pressure for an overhaul eases.

There's no room for more delays ... We only have one chance to get this right, he said.

CRITICISM AND CONCERNS

The Commission's plans need the approval of EU leaders, who will discuss them in June, and then the European Parliament. The Commission wants the new system in place by the end of 2010.

Although the new risk council would have no binding power, it would be able to oblige an EU member state to explain why it was not taking action.

Britain has made clear it does not support moves that would reduce its regulatory sovereignty but Barroso signaled he believed EU leaders would back the moves at a summit in June.

Britain has also said it does not want the ECB to chair permanently the risk council and would be happier with a neutral chair or a rotating one.

Some critics say the system centralizes too much power while others are concerned it will be too unwieldy. It is also not clear which country would bail out a cross-border bank.

The EU is under pressure to act following criticism that its response to the crisis was too little, too late, even though it eventually came up with a fiscal stimulus package amounting to 5 percent of the bloc's economic output.

The response was overwhelmingly national and there was not any strong European political message on how to deal with this, said Thomas Klau of the European Council of Foreign Relations.

The European Commission says recession could wipe out 9.5 million jobs this year, and trade unions said about 350,000 people took part in marches in Madrid, Brussels, Berlin and Prague this month to demand more government action to save jobs.

The public criticism is widely seen as one reason why the turnout at June's European Parliament election could be low, a factor that could boost non-mainstream forces in the institution that is responsible for passing many EU laws.

New data on Wednesday showing consumer confidence held up in May in France and Italy, offering the latest evidence the recession may be easing.

That followed similar news from many other countries in the region and the United States on Tuesday, where consumer morale hit an eight-month high.

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