"The bonus bubble has burst"

European Union leaders agreed on Thursday evening to seek curbs on bankers' bonuses at next week's G20 summit. They also said they wanted evidence that the recession is over before they stop spending to prop up their economies and they agreed to help the developing world fight climate change.

A compromise was reached finally in the late evening

The leaders of the 27 European Union member states met in Brussels Thursday evening to come up with a common European stance before the meeting of the G20 in the American city of Pittsburgh next week.

The Group of 20 includes the 19 largest economies in the world plus the European Union. The 27 member states of the European Union are good for more than one fifth of economic world production. If they go to the G20 summit with one voice they will have more influence, is the argument for the EU meeting in Brussels ahead of the G20.
Finding a single voice for the EU was not easy. Especially regarding bankers' bonuses the opinions were quite diverse. French President Nicolas Sarkozy (photo) especially wanted a strict cap on bonuses. He even threatened to leave the meeting if no accord was reached.

British Prime Minister Gordon Brown fears for the consequences on employment in the financial heart of London is bonuses are limited too severely. In the end the EU leaders reached a compromise late Thursday evening.

They agreed that bonuses should be linked to long-term performance of a company. They also agreed that the same regulations would apply in all 27 EU member states, with the threat of sanctions if this were not the case.
The EU leaders further agreed that the board of a financial institution should have oversight on the amount paid and the risk involved. Further, bonuses should be limited either in relation to a certain proportion of total pay of the bank's revenues or profits. If a bank's performance deteriorates, the bonus could be reclaimed.

"We need to deliver on this -- it's time to say enough is enough," Swedish Prime Minister Fredrik Reinfeldt (photo above), whose country holds the EU presidency, told reporters in Brussels. "I hope tonight we can say the bonus bubble has burst."

Regulators and central bankers are working on other reforms to make financial markets safer and root out excessive risk-taking by banks.

The Basel Committee on Banking Supervision, a forum of regulators, said one priority was to have credible plans to unwind troubled banks and limit spill over to the rest of the banking sector at such moments.
Echoing comments by an aide to Obama underlining the importance of seeking more balanced global economic growth, German Chancellor Angela Merkel demanded a "charter for a sustainable economy" and British Prime Minister Gordon Brown called for a "new system of managing our global economy".

Officials from several G20 countries say that now is not the time to withdraw the trillions of taxpayers' money pumped into economies to counter recession.

According to British PM Brown (photo), "Until the recovery is established, all countries must implement ... stimulus packages, not just this year, but throughout 2010."

Financial aid for the developing world to help fight climate change

The 27 heads of state and government also agreed that the rich nations should give the developing world up to €7 billion a year to fight climate change.