EU LEADERS have agreed to press the US and other big world economies to limit bankers’ bonuses and set up a new global financial supervisory system.
They have also agreed to call on all countries in the G20 group of leading powers to step up efforts to agree a global deal on climate change this year.
“I believe that people have been appalled by the suggestion in some institutions, and their practices, that they simply want to return to the policies of the past,” said British prime minister Gordon Brown yesterday at a summit to agree a common EU position ahead of next week’s G20 meeting.
Mr Brown, who will chair next week’s G20 meeting in Pittsburgh, also called for a new “global compact” on economic governance to be thrashed out in Pittsburgh. This proposal would set up the G20 on a permanent basis to deal with issues related to the global economy and expand the role of the International Monetary Fund (IMF) to provide economic analysis.
A summit communique agreed by EU leaders said the group of leading powers should commit to “binding rules for financial institutions on variable remuneration backed up by the threat of sanctions at national level”. It also asks G20 leaders to “explore ways to limit total remuneration in a bank to a certain proportion either of total compensation or of the bank’s revenues and/or profits”.
The issue of bankers’ pay is politically sensitive for EU leaders, who have committed trillions of euro in state aid to prop up ailing banks since the collapse of Lehman Brothers last year. France and Germany have called publicly for mandatory caps on bankers’ pay to be considered by G20 leaders. But opposition from Britain, which believes such a system is unworkable, and the US prompted EU leaders to agree to call for somewhat looser forms of regulation of remuneration packages.
German chancellor Angela Murkily said setting bonus payment limits was one of her top goals at the G20. “I’m optimistic that we can make clear that bonus payments must be tied to long-term profitability,” she said.
The union agreed to begin designing “exit strategies” to unwind the unprecedented state support given to national economies through tax cuts and public spending to try to stimulate economic growth. But the communique also warned that stimulus efforts “must be maintained until recovery is secured”. Overall support to the EU economy in 2009 and 2010 is worth a staggering 5 per cent of Europe’s gross domestic product.
EU leaders also held a discussion on climate change, prompting some to express concern at the slow pace of discussions aimed at getting a new global agreement on cutting greenhouse gases.
The European Commission published a paper last week saying €5-7 billion per year was required between 2010-2012 to help developing countries cut greenhouse gas emissions.
The summit communique said the group of nations should recognise the need to “fast-start international public support for addressing urgent climate financing needs in developing countries, in particular least developed countries”.