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G20

EU leaders vow to limit bonuses ahead of summit

Text by: NEWS WIRES
4 min

EU leaders have agreed to present a united front on limiting bonuses at next week's G20 summit in Philadelphia. European Commission President Jose Manuel Barroso (left) called for the creation of "a new world economic model".

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AFP - Europe's leaders agreed Thursday on a bid to jolt US President Barack Obama into a future 'claw back' of excessive bankers' bonuses at next week's G20 summit.

"The bonus bubble bursts tonight," said Swedish Prime Minister and current European Union presidency holder Fredrik Reinfeldt seven days from pivotal talks on bonuses, exit strategies and financing climate change in Pittsburgh, Pennsylvania.

"Banks, some of which owe their very survival to massive support from taxpayers' money, should not be able to take advantage of good results in the future pretending that the crisis was just a minor setback," Reinfeldt added.

He said not to rein in bonuses would be "a provocation in Europe -- especially when set against a steep rise in unemployment," which he said was expected to reach post-war record levels by 2010 with millions more workers tossed on the dole.

European Commission President Jose Manuel Barroso said "nothing less than a new world economic model for sustainable growth" is required.

"We must show zero tolerance for any return to the bad old ways. Our citizens are understandably horrified at reports of banks receiving public money paying exorbitant bonuses."

In a change to the draft summit declaration, the EU added in the phrase that bonuses "could be cancelled in case of a negative development in the bank's performance."

The 27 EU members also agreed to pursue "an absolute limit on bonuses, in other words a cap," according to senior European finance minister and Luxembourg premier Jean-Claude Juncker.

"The British have problems with that, like the Americans... (but) we are going to study the question," he added.

Juncker had earlier said Europe should act on bonuses "whether the Americans are with us or not."

French President Nicolas Sarkozy is driving efforts to see Brussels go further than the G20, adding that "more severe rules" on banks' capital ratios can be applied even if only within Europe initially.

Even British Prime Minister Gordon Brown said "there is no going back to the bonus structure of the past," admitting the issue had "angered the populations of almost every country."

A top US presidential aide has already ruled out fixed caps despite Obama lashing out at top Wall Street executives this week.

There was no breakthrough, however, on diverging views over the unwinding of massive government stimulus.

Brown said governments worldwide should pump out another 2.5 trillion dollars of state support over the coming year with fighting unemployment now "uppermost in our minds."

Others, though, wanted to concentrate on reining in huge deficits running in some cases to 200 percent of national output.

"The foundation for the financial crisis was highly indebted people -- the solution cannot be highly indebted countries," said Reinfeldt.

On financing the fight against global warming, the final summit declaration said G20 countries, with particular emphasis on the US, should "significantly step up the pace of negotiations in order to achieve a successful outcome in Copenhagen" during United Nations talks in December.

Said Reinfeldt: "It's time for a wake-up call to world leaders on climate. We really need to step up, (and) start delivering action."

Diplomatic sources, though, warned that Britain was in the opposite camp from France, Germany and others.

The EU commission estimates that the developing world could need 100 billion euros per year by 2020 to tackle climate change.

But France and Germany as well as some of the eastern nations including the Czech Republic, Hungary and Italy are reluctant to fix bloc-wide aid targets at this stage.

Said Brown: "You can't get a climate-change deal without an agreement on finance."

A bid by German Chancellor Angela Merkel to kickstart debate on a global, so-called 'Tobin' tax on financial transactions that could act as a cushion against future economic setbacks will be revisited, ministers said.
 

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