G20 seek to bridge splits over bankers' bonuses
European finance chiefs called on Friday for an end to the bonus culture among bankers, highlighting a split with the US at G20 talks also debating the winding down of emergency support to the world economy.world Updated: Sep 05, 2009 15:10 IST
European finance chiefs called on Friday for an end to the bonus culture among bankers, highlighting a split with the US at G20 talks also debating the winding down of emergency support to the world economy.
Finance ministers from the world's richest countries and top emerging powers are using the two-day meeting in London to lay foundations for a Group of 20 leaders' summit in the US city of Pittsburgh on September 24-25.
Bankers are again in the crosshairs of European countries led by France and Germany who argue their lucrative compensation schemes fuelled a short-term pursuit of profit that helped destabilise the financial system.
Arriving at the meeting, France's finance minister Christine Lagarde pledged to launch an "onslaught against bonuses."
She indicated she would ratchet up the pressure on the US and Britain, telling reporters governments should be responsible to voters, not financiers.
"The bonus culture must come to an end and it must end at the G20 meeting in Pittsburgh," Lagarde and colleagues from six European countries including Germany wrote in the Financial Times Friday.
"We must be very clear: these practices are not only dangerous, they are improper, cynical and unacceptable."
The strongly-worded letter -- which raised capping and taxing bonuses -- indicated splits on the issue.
Britain and the United States, keen to protect major financial centres in the City of London and Wall Street, going so far.
The US sees bonuses as a "non-subject", according to a European official who spoke anonymously.
And British finance minister Alistair Darling, host of the London meeting, told the BBC Friday that he did not think mandatory capping was "a practical proposition" although Britain has backed more moderate action.
Sweden, which holds the rotating European Union presidency, has called an extraordinary summit of EU leaders on September 17 ahead of the Pittsburgh summit which will seek a common position on curbing bonuses.
A year after the worst financial crisis since the 1930s erupted and with countries like Japan, France and Germany now out of recession, the G20 has shifted from firefighting to ensuring recovery is sustained and deep-rooted.
But politicians warn there is no room for complacency and are also debating when and how to reverse the massive fiscal stimulus which states pumped into their economies after the credit crunch.
Most agree it is important to start preparing exit strategies now, but emphases differ on when they should be implemented.
US Treasury Secretary Tim Geithner, while downplaying hopes for concrete results from Friday and Saturday's meet, has reportedly said exit strategies are "very important to confidence" on the financial markets.
Swedish finance minister Anders Borg said Friday that world economies were still "standing in the ashes" of economic catastrophe.
"When you've just come out of the ashes, it's not time to call off the fire department," he added.
"I think it's very reasonable that during 2010, we will keep both monetary and fiscal policy expansionary but having said that, it is also very, very important that we start to talk and plan our exit strategies".
Meanwhile, major emerging economies Brazil, Russia, India and China said it was "too early" to talk of an end to the crisis". Brazilian finance minister Guido Mantega added that "the exit should be gradual".
Also at the meeting, the US will press for stronger capital and liquidity standards for banks so they can absorb any future losses without needing state help.
"(The) regulatory framework failed last year," Geithner wrote in Friday's FT.
"Strengthening capital requirements is an essential part of a broader effort to modernise our regulatory framework so that the financial system is strong enough to withstand the failure of large, complex institutions."