UK, France, Germany urge G20 post-crisis plan, tougher regulation and tax measures

September 3, 2009

German Chancellor Angela Merkel (R) speaks with French President Nicolas Sarkozy and British Prime Minister Gordon Brown (C) at the start of a meeting in the Chancellery in Berlin, February 22, 2009. By Yann Le Guernigou
CALIGNY, France, Sept 3 (Reuters) – Britain, France and Germany called on the G20 on Thursday to discuss exiting measures implemented to tackle economic crisis, as well as limits on bank bonuses, at an upcoming summit in Pittsburgh.

In a joint letter to European leaders, British Prime Minister Gordon Brown, German Chancellor Angela Merkel and French President Nicolas Sarkozy said major economies had to avoid creating new global imbalances as the recession receded.

They said that although the world economy was stabilising, the crisis was not yet over and urged governments to implement fully their recovery plans while ensuring that they did not create the conditions for new global imbalances in the future.

“We must therefore work on exit strategies that will be implemented in a coordinated fashion as soon as the crisis has ended,” their joint letter said.

Finance ministers and central bankers from the G20 group of developed and emerging economies meet in London on Friday and Saturday ahead of a gathering of G20 leaders in Pittsburgh on Sept. 24-25.

The three leaders also asked the G20 to discuss tougher regulation of the financial sector and a “complete list of counter measures” to be introduced in March 2010 to penalise any countries that were still deemed not to be cooperating over their tax regimes.

“We also have to examine ways of limiting bonuses at banks be it in relation to total payouts, be it in relation to the bank’s revenues and/or profits,” they said in the letter, a copy of which was seen by Reuters.

The letter was addressed to Swedish Prime Minister Fredrik Reinfeldt, who holds the EU presidency, and other European leaders.

“The letter on bonuses that I will send to the President of the European Union this afternoon will contain a little surprise, it will be signed not only by Mrs Merkel and myself, it will also be signed by Mr Gordon Brown,” Sarkozy said in a speech to workers in the town of Caligny.

“Even the English understand that you have to regulate, you have to impose limits and that there are unacceptable scandals,” he said.

The three leaders said they expected the G20 to issue clear guidelines on salaries and bonuses in the banking sector.

Amongst these, they called for:
— Improved governance, with commissions put in place in banks to define and develop salary policies
— Increased transparency on pay
— Bonuses to be set at an “appropriate” level compared to employees’ fixed salaries
— Guaranteed bonuses to be avoided; payouts to depend on results; bonuses to be staggered over time and cut back or pulled if bank results deteriorate.
— Any stock options or shares handed out as part of a salary package to be sold only after a specific period
— Bank executives to be answerable over the risk they take
— Bank boards to be allowed to cut executive pay if results worsen
— Banks that refuse to accept these rules to be penalised.

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