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September 5, 2009

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Europe pushes for cutbacks on corporate pay

EUROPEAN countries made a concerted push yesterday to put the thorny issue of bankers' pay and bonuses at the top of the agenda for a meeting of finance officials from the Group of 20 nations.

The finance ministers of Sweden, France, Spain, Germany, Italy, Luxembourg and the Netherlands want the excessive payouts that have been blamed in part for the current crisis to be curtailed, calling for a ban on bonuses guaranteed for more than a year.

"Bonuses should be paid out over a number of years and should mirror the individual's and the bank's actual performance over time," the ministers wrote in a joint opinion piece in Swedish daily Dagens Nyheter published yesterday.

The finance ministers and central bankers from the G-20 are expected to use the London meeting to stress their shared commitment to boosting the global economy together -- and start talks about how and when to unwind trillions of dollars of stimulus.

Washington wary

The bonus issue has received a lukewarm response from the United States, which instead wants to start talks on a new international accord to increase banks' capital reserves.

G-20 leaders promised at their London meeting in April to pass "tough new principles on pay and compensation." Excessive pay practices are considered to have fueled the risk taking that helped cause the financial crisis.

US Treasury Secretary Timothy Geithner has downplayed the talks scheduled for yesterday and today as a "stock-taking meeting, not a new-initiatives meeting" on the road to the leaders' summit later this month.

Host Britain has supported the European push to tackle bank bonuses, but has stopped short of some of the more stringent proposed new rules. Treasury chief Alistair Darling said that bonuses and boosting capital were international issues that needed to be addressed as the banking sector was key to any recovery.

Global problem

"Nowadays, no one large bank can simply operate in a vacuum, they operate right across the world, so this truly is an international problem," Darling told BBC radio yesterday.

Sweden, which holds the rotating EU presidency, also announced that European Union leaders will hold an extra meeting to discuss bonuses and ways to pull the EU out of its deep economic slump on September 17, ahead of the September 24-25 G-20 leaders summit in Pittsburgh.

The finance ministers and central bank officials from rich and developing countries representing 80 percent of world economic output are convening amid mounting signs of an economic recovery. Japan, Germany, France and Australia all recorded growth in the second quarter while Britain is widely expected to do so in the third quarter.

They are expected to agree on an ongoing commitment to boosting the economy, but there is friction over when exactly to scale back stimulus efforts.


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