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French President Nicolas Sarkozy has called for a fundamental rethink of capitalism in the aftermath of the financial crisis in order to restore “a moral dimension” to free trade.

"We need deep profound change," he said in his keynote speech at the World Economic Forum in Davos. "Were we not to change, we would be showing tremendous irresponsibility."

Sarkozy said citizens had to be protected from "skewed capitalism” of the type seen until recently. "Financial capitalism went so wrong, so badly wrong. It was because many banks were no longer doing their job," Sarkozy said. "The role of a banker is not to speculate. It is to analyse risk. It is to assess the capacity of borrowers to repay their loan and it is to finance the growth of the economy."

"We are not asking ourselves what we will replace capitalism with, but what kind of capitalism we want?" he said. "We must re-engineer capitalism to restore its moral dimension, its conscience. By placing free trade above all else, what we have is a weakening of democracy.”

France has supported forcing banks to hold more capital and curbing bonus payments in global negotiations over the past year on how to reform the system to prevent future crises. He gave some backing to US President Barack Obama's plans to curb the banking system, but insisted that it was vital to approach the issue from a global perspective.

“Obama is right when he says that banks must be dissuaded from engaging in proprietary speculation or financing speculative funds,” he said. “But this debate cannot be confined to a single country, whatever its weight in global finance. This debate must be settled within the G20.”