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September 3, 2009

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EU cheers push for curbs on bonuses

TOP European Union finance officials are cheering a French and German push to get the United States and other countries to join them in restricting huge bonuses to top bankers that critics say encourage excessive risk-taking.

France and Germany are calling for the US and other members of the Group of 20 leading economies to limit bank bonuses in the wake of public anger over payouts to executives who quit banks on the verge of collapse over the past year.

At a meeting yesterday of EU finance ministers, Sweden's Anders Borg said "the bonus culture must come to an end and it must come to an end at the latest in Pittsburgh," Pennsylvania, where G-20 leaders will meet on September 24 and 25. "The bankers are partying like it is 1999, but it is actually 2009," Borg pointed out.

Wouter Bos of the Netherlands said he was "extremely pleased" that large EU nations are finally talking about capping bonuses, something the Dutch have been asking for over the last year.

France has moved swiftly, with major banks agreeing last month to curb the way they award bonuses and impose penalties on traders who lose money for their companies. At least half of a bonus will be withheld and paid out over three years depending on performance, and the French government will refuse to do business with banks that don't toe the line.

French President Nicolas Sarkozy is calling for "an end to the scandal of bonuses."

German Chancellor Angela Merkel said banks are starting to behave the way they did before the financial crisis that threatened the entire credit system last fall, saying politicians need to act or "otherwise there is a major problem for credibility." Germany has called for payment of top managers' bonuses to be delayed for four years to make sure they actually reward success.

Britain - home to Europe's biggest financial center, the City of London - has been slower to move despite public outcry over Fred Goodwin, the former chief executive of Royal Bank of Scotland Plc, who quit the loss-making bank with an annual pension of 700,000 pounds (US$1.14 million).


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