Bank bonuses

European Union countries have agreed to take the lead in calling for an end to excessive bank bonuses at an upcoming G-20 summit in the US city of Pittsburgh.

France turned up the heat last week, when President Nicolas Sarkozy announced tough new rules on bonuses for French bankers and traders. Sarkozy was upset by the revelation that BNP Paribas, France's largest bank, had set aside one billion euros for staff bonus payments.

On Monday, Sarkozy won support from German Chancellor Angela Merkel for his anti-bonus crusade. Merkel said she fears that banks are beginning to behave the way they did before the financial crisis last autumn, which ended up threatening the entire credit system.

Problems with capitalism

The bonus issue has become "emblematic" of all that is wrong with capitalism, French Finance Minister Christine Lagarde said as she arrived in Brussels on Wednesday for a meeting on the topic.

European Union finance ministers agreed at those talks to push the bonus issue at the Pittsburgh G-20 meeting. Reforming the international banking system is expected to top the agenda at the meeting, which is to bring together leaders from the world's 20 leading economies.

Several European banks have come under criticism for paying multi-million euro bonuses to top managers even as European countries continue to deal with the fallout of a global financial downturn. The bonus culture is seen as helping create banking culture which critics say is too focused on risky, short-term gains.

The push for banking reform has found broad support among European Union finance ministers.

Swedish Finance Minister Anders Borg said it's essential to "stop the restarting of the bonus culture." He said he's worried that bankers are "partying like it's 1999."

"What we're seeing now is that big countries are finally willing to cooperate with us and create a level playing-field to regulate bonuses - and that's extremely good news," Dutch Finance Minister Wouter Bos said Wednesday.

Britain wants to keep bankers happy

But one important European ally has expressed skepticism on trying to push through a mandatory cap on bonuses. British Prime Minister Gordon Brown on Tuesday said he would take action in reigning in excessive bonuses, but warned that he thinks a cap would be difficult to enforce.

"I think that is very difficult in an international environment. But there may be ways... that we could do better," said Brown.

Britain is said to be worried that such limits would prompt bankers to abandon London and set up shop elsewhere in the world. US leaders have expressed similar concerns.

th/dpa/AP/AFP
Editor: Chuck Penfold