The second article here outdates the first. This morning it appears that Brown has surrendered to Sarkozy-Merkel over bank bonuses. There never were any economic grounds for capping these bonuses.
The only real motivation is further to cripple the City of London because the real movers and shakers will clear off to somewhere more congenial. The banks themselves will be weakened and the beneficiaries will be the poiticians, especially those in the Franco German axis. Brown’s change of stance will infuriate Obama who is already angry with him for his duplicity over Lockerbie.
Brown should answer the question “Who’s a surrender monkey now?”
The ‘letter’ in the second piece reads as though the EU is running the world and what other people think doesn’t matter.
Christina
THE TIMES
3.9.09
US warns spending cut may damage recovery
Katherine Griffiths, Banking Editor
America has warned that it is too early to withdraw funding to boost the global economy ahead of a key meeting with G20 finance ministers in London this week.
Timothy Geithner, the US Treasury Secretary, said: "You're seeing the first signs of positive growth in this country and around the world. We've come a very long way but we have to be realistic, we've got a long way to go still."
Mr Geithner was speaking as he prepared to leave for London to meet with his counterparts on Friday and Saturday before G20 leaders attend a summit in Pittsburgh on September 24.
Mr Geithner’s comments echo the sentiment of Alistair Darling, the Chancellor of the Exchequer, who said in an interview with The Independent: "There are encouraging signs that the joint action we have taken in the last 10 months or so is having an effect. We are beginning to see the fruits of that action. But it is too early yet [to abandon it]. We must not get ahead of ourselves."
Mr Darling and Gordon Brown are facing a scramble to plug a gap in a $1 trillion global rescue package that was agreed at a G20 summit in April and was hailed as the Prime Minister's biggest success.
Today's line taken by Britain and America is at odds with the views of Germany and France, which have stressed the need to cut government spending to reduce debt.
Peer Steinbrück, Germany's Finance Minister, has called for the reduction of fiscal measures as soon as possible.
Tensions are growing as some major economies including Germany, France and Japan [Japan certainly hasn’t ‘emerged’ from anything! In fact its tax revenues have totally collapsed and production is still down 23% . (see “While those behind cried "FORWARD", those in front cried "BACK" sent yesterday -) France’s recovery is miniscule-cs] have emerged from the recession in the second quarter, while the UK is taking longer to recover.
Politicians have been marking out their ground before the two-day meeting of finance ministers from the countries in the G20 club. Another subject which may lead to disagreements is bankers’ bonuses.
France has taken a high profile stance in calling for a cap on bonuses and raising the possibility of limiting the size of banks.
The UK and US — the home to the world's biggest banking sectors — are resisting the idea.
Prime Minister Gordon Brown said yesterday that there could be a "legitimate debate" about a possible fixed percentage of a bank's profits or revenues being paid out to employees, but did not back an absolute cap.
There has already been bad feeling between the US and UK and Europe this week over the European Union's proposals to clamp down on hedge funds and private equity firms.
The EU wants all financial firms to adhere to strict new rules, including giving far more disclosure about their holdings, keeping higher levels of capital to cover potential losses and limiting the amount of debt they can take on.
The plan was yesterday labelled a "blanket attack" on London's role as one of the biggest financial centres by Mayor Boris Johnson.
The proposals have caused an outcry in the UK, where many of Europe's hedge funds and private equity firms are based. They have claimed that the EU's plans will be unworkable for many firms, which will effectively mean that they are unable to sell their products to European investors.
American financial firms are also angry about the proposals as they too will be banned from marketing in Europe. Many fear that this could lead to a trade war with the US, which could be very damaging for European businesses more generally.
FINANCIAL TIMES
3.9.09 -timed 1409 hrs
EU leaders unite against bank bonuses
By Norma Cohen and Brooke Masters
The leaders of Europe’s three largest nations, Britain, France and Germany, on Thursday signalled that they are moving closer to a general agreement on the controversial issue of bankers’ bonuses ahead of the G20 finance ministers’ meeting in London this weekend.
In a letter [to whom? -cs] released on Thursday, the UK’s Gordon Brown, Germany’s Angela Merkel and France’s Nicolas Sarkozy threw their weight behind broad principles that linked the size of bonuses to fixed pay and to bank performance over long periods of time.
They also came out in favour of deferring awards and claw-backs in case of negative outcomes.
In what appeared to be a recognition of outstanding disagreements among them, they agreed to “explore ways to limit total variable remuneration in a bank either to a certain proportion of total compensation or the bank’s revenues and/or profits.”
A French proposal to cap bonuses at a certain percentage of profits has been highly controversial and opposed by the UK. The letter is silent on the subject of targeted taxes for outsized bonuses, the other significant contentious issue.
The letter also suggests that financial institutions that do not comply with agreed G20 guidance on risky business activities should not be given mandates to operate in G20 member states.
The public, the letter said, is disgusted with the speed with which banks appear to have returned to former practices. “Our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers’ money having been mobilised to support the financial sector at the height of the crisis,” the letter said. [What utter rubbish! Strong words, signifying nothing -cs]
It also set out key areas where Europe’s largest members agree should fill the G20 agenda, both among its finance ministers and at the meeting of heads of state later this month in Pittsburgh.
In particular, the EU leaders are seeking increased capital requirements for activities that could pose a risk to financial stability [this refers primarily to insurance companies which have given no trouble and will vastly increase the cost of insurance and DEcrease the yield on annuities. They don’t know what they are doing! -cs], and rules to address the moral hazard problems posed by “systemically relevant” institutions through tougher supervision.
They also seeks a “roadmap for necessary reform of governance and representation at the International Monetary Fund, which must be completed in January 2011, and of the World Bank to be completed in spring 2010.”
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