France will go it alone and axe bankers’ bonuses even if Britain and America refuse to cap them, the French Finance Minister said yesterday after the G20 finance ministers’ meeting in London.
Christine Lagarde said: “We don’t just mean what we say in France, we do it.” She reminded delegates that President Sarkozy had summoned France’s top bankers to the ?lys?e Palace and cut their bonuses by half, insisting yesterday that he would continue to do so.
But as the French dug in their heels over the issue, Alistair Darling, the Chancellor, said that a G20-wide cap on bonuses would be “unenforceable” and warned of “implacable” opposition, believed to be from America. Proposals to curb excessive pay and bonuses are being pushed by European nations at the two-day meeting of finance ministers from the G20 group of major economies hosted in Whitehall yesterday and today.
Mr Darling warned that the simple cap favoured by countries such as France would not be practical, as top bankers would simply find other ways to reward themselves.
Finance ministers of seven European countries — Sweden, France, Spain, Germany, Italy, Luxembourg and the Netherlands — yesterday denounced the massive payouts which have been blamed for fuelling excessive risk-taking as “dangerous [...] indecent, cynical and unacceptable”.
Advertisement
After the meeting, Mme Lagarde said: “Enforceability is a question of determination . If policymakers are determined they will find ways. Solutions will differ [...] the terms and conditions, but the collective drive will determine enforceability.”
While Mr Darling wants a global agreement on the structure of remuneration packages, he favours the deferral of bonus payments and the ability to claw them back, rather than a cap.
The finance ministers — who meet again today at the Treasury for talks — discussed the timing of the withdrawal of state help and central bank assistance for their own bailed-out economies. They also argued over new proposed rules to force banks to beef up their capital reserves.
Last night, the finance ministers attended a formal dinner at the Guildhall in the City, hosted by the Chancellor, where they were fed goat’s cheese salad, beef and roast potatoes, and greengage tart with ice-cream. Officials did not provide details of the wine list because it was “a working dinner”.
Today, the finance ministers will conclude their talks at the Treasury. They have a good deal of ground to revisit.
Advertisement
Yesterday, the French resisted measures proposed by Britain and America to force banks to increase the amount of capital they hoard as a cash cushion for difficult times.
Timothy Geithner, the US Treasury Secretary and Mr Darling want firm commitments in place by the full G20 summit of world leaders in Pittsburgh later this month, that will force lenders to beef up their capital requirements, raise their available cash reserves, and limit borrowing levels. The French are unconvinced that the current rules — already in place during the banking crisis — are insufficient.
The G20 ministers will also today revisit the topic of drawing to a close fiscal stimulus packages disbursed to bail-out crisis-gripped economies.
Britain and America want a commitment from all of the G20 countries that assistance such as low interest rates, cheap central bank money, and extensive loan guarantee schemes — will remain in place until the world economy is on a surer footing. In a letter this week, the French and Germans appeared to have backed down on their keenness to push for an exit strategy.
Yesterday, Peer Steinbrueck, the German Finance Minister, said: “One cannot of course yet talk about a concrete time. That is dependent on how the economic and financial crisis develops. There are some positive signs but I myself would not be so optimistic as to say we have everything behind us already.”
Advertisement
Some ministers are worried that should governments withdraw their assistance too early they will undermine fragile economic recovery signs.
Guido Mantega, the Brazilian finance minister, said: “Some people have been talking about exit strategies, I don’t think now is the time. The recovery is very small. Premature exit strategies may cause “a ‘W’ in the recovery,” referring to the risk of the world economy sinking into another recession no sooner has it emerged from the last.
Jean-Claude Trichet, the President of the European Central Bank said: “Now is not the time to exit. But I would like to make it clear that the ECB has an exit strategy, and we stand ready to put it into action when the appropriate time comes.”
The ministers will meet again today at the Treasury.