EU leaders took aim at the banking sector yesterday (31 August), pledging to check banks’ power and push for limits on bonus payments at a G20 summit later this month.
German Chancellor Angela Merkel said bonus payments to bankers were “rightly driving a lot of people crazy” and that she and French President Nicolas Sarkozy wanted the G20 summit in Pittsburgh on September 24-25 to make progress on financial regulation.
“No bank may become so big that it could get into a position where it could blackmail governments,” Merkel told a joint news conference with Sarkozy in Berlin. Germany and France regard financial market excesses as being the root cause of the global economic downturn and want tighter regulations to prevent a repeat of the biggest financial crisis since World War Two.
“We want to see things changed in Pittsburgh,” Sarkozy said. “These excesses cannot be allowed to be repeated as if nothing ever happened.”
Meanwhile, British Prime Minister Gordon Brown also pledged ‘tough action’ on excessive remuneration in the financial sector as part of an international effort.
In an interview with the Financial Times, Brown said pay and bonuses should be paid on long-term results, not speculative gains, and banks should take back bonuses if performance were to suffer in subsequent years.
Merkel said Germany and France would propose that the European Union take a joint position to Pittsburgh, and called for the bloc to press for the full implementation of agreements that G20 leaders reached in April.
At their April meeting in London, the G20 leaders agreed to extend regulation and oversight “to all systemically important financial institutions, instruments and markets” including systemically important hedge funds. Merkel believed a consensus could be found on dealing with bonus payments, drawing on new rules made by France and Germany.
She said G20 leaders would also discuss “exit strategies” from the fiscal and monetary policies they have used to blunt the impact of the economic and financial crisis.
“We must take care that, on the one hand, we act correctly with regard to the recession and the economic crisis but on the other hand we mustn’t make the same mistakes again that led to this crisis,” she added.
“After 9/11 the loose monetary policy in America was not withdrawn and this bubble was able to arise,” she said.
Merkel said she and Sarkozy also discussed Iran’s nuclear program. She said Tehran should realize how “very serious” a September deadline is for negotiations on its nuclear program. U.S. President Barack Obama has given Iran until September to take up a six-power offer of talks on trade if it shelves nuclear enrichment, or face harsher penalties.
(EURACTIV with Reuters.)