The worst of the global economic crisis could be over by the end of the year, a senior British politician claimed in Bahrain.

However, Secretary of State for Business, Enterprise and Regulatory Reform Lord Peter Mandelson called for a shake-up of the world's financial systems to prevent a repeat.

He said urgent steps were required to ensure countries were able to recover from the downturn and the resulting recession.

'Each of us has a contribution to make, but everything that we do will be strengthened and multiplied if we work together, collaboratively as members of the international economic community,' he said.

'That is why it is very important that we have agreed to greatly increase the resources available to the International Monetary Fund to expand reserves that emerging economies can draw on in order to continue to make their contribution to global growth.

'We also have to put in place the necessary reforms to the way we govern the financial system in order to make sure that the present crisis does not repeat itself.'

Lord Mandelson was speaking during a Press conference at Bahrain International Airport yesterday during a whistle-stop trip to Manama.

He held meetings with His Majesty King Hamad, Prime Minister Shaikh Khalifa bin Salman Al Khalifa and Crown Prince and Deputy Supreme Commander Shaikh Salman bin Hamad Al Khalifa during which he discussed bilateral relations and the global economic situation.

Lord Mandelson praised British relations with Bahrain and said the country could play a key role in helping solve the global credit crunch.

'Bahrain's financial system and the way it is regulated offers many positive lessons for the rest of the world, which is why Bahrain is in a strong position to weather the economic downturn,' he said.

'The key to success is speedy action to take forward all the agreements and conclusions reached at the G20 meeting and the Gulf states, including Bahrain, have an important contribution to make.'

He said Islamic finance could also have a key role to play in the economic recovery.

'Bahrain is a very important centre for Islamic finance and London too has adapted to the opportunities that this offers and the demand that many countries and people have for this particular and specialised finance,' he said.

'It is one of the ways in which the two nations can collaborate further in their financial services in order to extend and expand the range of services that we already offer.'

'We have now stabilised the banking sector to a great extent. It will take some time for credit to flow normally,' Lord Mandelson said.

'It is essential that we do everything necessary to repair our banking systems because without that we cannot fix the problems in the rest of our economies.

'I think during the course of the year we will see a significant change and strengthening in economic conditions.

Recovery

'I would certainly hope that by the turn of the year, if the pace of recovery that we have seen so far is maintained and quickens, we will be facing a different 2010 than what we have been facing this year.

'By the world coming together and taking action jointly we will come through it more speedily and at less cost than we would otherwise.

'No country can take action within their own economy that is needed to push back against those conditions that are attacking all our economies to a greater or lesser extent.'

Lord Mandelson also urged world leaders not to give up on the proposed European Union-GCC Free Trade Agreement, which was first proposed in 1990.

'I think the remaining barriers are few and low and with political will we will be able to climb over them,' he said.

'I know there are issues to do with so-called poli