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Bonus culture dominates pre-summit meeting in London

Video by Hannah MOFFAT

Text by FRANCE 24 (with wires)

Latest update : 2009-09-05

Finance ministers are meeting in London for two days of preparatory talks ahead of a Group of 20 summit on Sept. 24-25 in the US city of Pittsburgh. Despite the first signs of economic recovery, G20 leaders are counselling caution.

Finance ministers from the world's richest countries and emerging economic powers are meeting in London for two days of preparatory talks ahead of the Group of 20 summit in the US city of Pittsburgh on September 24-25.

As leading economies including France, Germany and Japan began climbing out of recession, the G20 is seeking ways to sustain this budding recovery until it really takes root. In a bid to reassure jittery financial markets, G20 leaders have said that the government stimulus packages introduced in response to the financial crisis will remain in place until recovery is more certain.  

With unemployment figures on the rise in several key economies including the United States, an International Monetary Fund (IMF) forecast of 1.3 percent global economic contraction for the year and sluggish growth throughout most of 2010, world leaders are remaining cautious.


“The biggest risk is to think that the job is done, that recovery is guaranteed,” British Finance Minister Alistair Darling told reporters on Thursday. “No country can be complacent.”


Disunity on bonuses

As governments worldwide look to improve bank regulation and accountability, disagreements have arisen over how to effect the neccesary changes. Although heads of state seem united in their outrage over recent high-profile examples of the massive bonuses received by financial executives, the differences run deep.

Several EU nations, led by France and Germany, have spearheaded an initiative to end the "bonus culture" after some struggling companies doled out multimillion-dollar bonuses to top executives after having received government bailout money. European leaders called on Friday for an end to this funnelling of millions of dollars into financiers’ pockets, which undermines responsible – and sustainable – business practices.

“The bonus culture must come to an end, and it must end at the G20 meeting in Pittsburgh,” said a letter from seven European finance ministers published in the London-based Financial Times on Friday. The ministers called disproportionate bonuses “improper, cynical and unacceptable”.

Lagging behind in this endeavour is the United States, which sees bonuses as a “non-subject”, according to one European official who spoke anonymously to Agence France Presse.

Britain has also voiced reservations, namely in connection with a French proposal to set caps on bonuses that London fears could drive major financial institutions out of the capital.

In hopes of presenting a united front in Pittsburgh, EU leaders will seek to hammer out an agreement on the bonus issue at an extraordinary summit on September 17.

All eyes on Pittsburgh

The G20 summit in the Pennsylvania city will take stock of the progress made since the Washington Summit of last year, when world leaders pledged to strengthen financial transparency, accountability and regulation, promote integrity in financial markets and reform international financial institutions in response to the global economic downturn.

US Treasury Secretary Timothy Geithner will push for new international standards on capitalisation and ensuring liquidity so banks can better weather the financial storms of the future without governments coming to the rescue.

US President Barack Obama is also hoping to make climate change a priority in Pittsburgh, with calls to eliminate subsidies on fossil fuels and increase transparency in the oil market.

Also at issue will be ensuring that the IMF receives all the money it was promised at a London G20 summit in April, when world leaders pledged to boost the fund’s resources by 1.1 trillion dollars.

Date created : 2009-09-05