A failure to understand the truth of God's mercy has left Europe "riddled with fear, resentment and anger," the Archbishop of Canterbury said yesterday, and has led some people even to turn to extremism.

Speaking in Assisi during a ceremony for the World Day of Prayer for Peace, Archbishop Justin Welby said today's society "struggles to distinguish between what something costs and what it is worth".

"In God's economy, we are the poorest of the poor; poorer than ever because we think ourselves rich," he said.

"Our money and wealth is like the toy money in a children's game: it may buy goods in our human economies that seem so powerful, but in the economy of God it is worthless. We are only truly rich when we accept mercy from God, through Christ our Saviour."

Though we think Europe is rich and strong, "The greatest wealth in European history has ended in the tragedies of debt and slavery," the Archbishop added.

"Our economies that can spend so much are merely sandy foundations. Despite it all, we find dissatisfaction and despair: in the breakdown of families; in hunger and inequality; in turning to extremists. Riddled with fear, resentment and anger, we seek ever more desperately, fearing the stranger, not knowing where to find courage."

The Archbishop was joined in Assisi by Pope Francis and Patriarch Bartholomew and a number of religious leaders representing other faiths.

The theme of the meeting was 'Thirst for Peace. Religions and Cultures in Dialogue'.

At lunch, the religious leaders were joined by 12 refugees who had fled war and conflict in Nigeria, Eritrea, Mali and Syria – which was represented by three Christians who fled the besieged city of Aleppo.

In his homily, Archbishop Welby urged those present to respond to God's call to "listen, to eat, to come, to trust".

"How do we hear God?" he asked. "So often in the mouths of the most helpless and the poorest. Jean Vanier of L'Arche tells us that those with great disabilities speak powerfully of hope, of purpose and of love to those who think they are strong."

He also shared Isaiah's vision of all nations coming together a one, drawn together "because the illusion of wealth is replaced by the reality of peace and love".

"That is where we end, as those who carry mercy from God through Christ to all humanity in actions that reveal mercy," he concluded.

"Sant'Egidio's work in Mozambique and around the world is a sign of what is possible when Christ's mercy flows through us. We are to be those who enable others to be merciful to those with whom they are in conflict. We are called to be Christ's voice to the hopeless, calling, 'Come to the waters' in a world of drought and despair; giving away with lavish generosity what we have received in grace-filled mercy."