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Europe

Finance ministers support bonus caps despite UK hesitations

Text by NEWS WIRES

Latest update : 2009-09-02

A French-led campaign to limit the bonuses claimed by bankers, traders and financial executives won broad support from European Union countries at a Wednesday meeting in Brussels, though Great Britain has reservations over enforcing the measure.

AFP - A French bid to crimp international bankers' bonuses won broad support from European countries in Brussels on Wednesday, but still faces strong British reservations.
   
Anders Borg, the finance minister for current EU president Sweden, said ahead of a meeting with his European counterparts that the key issue was "to stop the restarting of the bonus culture" by the time the G20, the world's major industrialised powers, gather in the US city of Pittsburgh this month.
   
The issue has become heavily politicised since major banks in the United States, Britain and France -- which is proposing a series of mandatory caps -- set aside multi-billion-euro provisions for bonus payments to top financial executives and traders.
   
Borg added: "The bankers are acting like it's 1999 but it's actually 2009.
   
"The bonus culture must come to an end and it must come to an end in Pittsburgh."
   
The head of the Eurogrup of eurozone finance ministers, Jean-Claude Juncker, also offered unqualified support in the run-up to a meeting of G20 finance ministers in London at the weekend intended to shape the financial agenda for Pittsburgh.
   
"I totally support the proposals made by France," for discussion at the G20 summit, Luxembourg Prime Minister Juncker told reporters as he arrived.
   
However, others acknowledged that Britain must still be brought on board if French President Nicolas Sarkozy's intention to secure strong G20 regulation on the issue is to succeed at a summit of world leaders in Pittsburgh on September 24-25.
   
Britain's Chancellor Alistair Darling did not attend the meeting of EU finance ministers in Brussels, sending Ian Pearson, a minister at the treasury, in his place.
   
A British official indicated that London's position was unlikely to deviate from its existing stance despite Sarkozy's call to arms.
   
Britain, mindful of protecting the financial capital of Europe in London, has voiced reservations, as has Washington.
   
Sarkozy's drive comes after he won a commitment from French bankers for a system of performance-related pay for traders, as part of a drive to rein in a bonus culture seen as a major factor in the global credit crunch.
   
However many bank chiefs believe such a bonus cap would be ineffective merely at national level and must be also be introduced by other major banking nations.
   
French Finance and Economy Minister Christine Lagarde said the proposals, which have already received support from Germany and the European Commission, were aimed at "bringing order to the bonuses and remuneration question which is obviously an emblematic issue (for us)."
   
The European commissioner for economic and monetary affairs, Joaquin Almunia, said EU nations "should follow the guidelines" which the EU's executive arm recommended in April, including blocking bonuses in non-performing banks and basing bonuses on "longer-term performance".
   
"Some of them are adopting measures that I consider broadly adequate in this regard," he added.
   
He said the bonus curbs were "reasonable and needed."
   
Dutch finance minister Wouter Bos said the Netherlands was "extremely pleased" at the emergence of fresh concrete proposals from the French.
   
Asked, though, if he thought Britain would follow suit, he admitted obstacles remain.
   
A public backlash at a return to multi-billion-euro or dollar bonus provisions among major banks in the United States, Britain and also in France has been accompanied by pressure from political leaders already forced to apply huge bail-out funding in their financial sectors.
   
But while British Prime Minister Gordon Brown on Tuesday pledged action on excessive bonuses, he said a mandatory cap would be difficult to enforce.
   
"I think that is very difficult in an international environment," said Brown, who visits Berlin on Sunday.
   
Juncker, meanwhile, said the worst of the financial crisis was "over for the time being," but added that it was too soon to withdraw fiscal stimulus packages.
   
"We have to continue this effort in the course of this year and next year," he told reporters.
 

Date created : 2009-09-02

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