MercoPress. South Atlantic News Agency

European leaders agree on global deal for bankers’ bonuses

French president Sarkozy has led the charge against high levels of bankers’ pay

European Union leaders have agreed to seek a global deal for bankers' bonuses to be clawed back if profits fall. The leaders meeting in Brussels approved the clause as part of a common EU position for next week's G20 summit in Pittsburgh in the US.

They want the threat of sanctions to be used to force banks to link bonuses to long-term performance. There is concern the current system may encourage short-term risk-taking, which helped trigger the banking crisis.

Speaking ahead of the meeting, UK Prime Minister Gordon Brown said there was broad backing for bonus restrictions.

“I believe that people have been appalled by the suggestion in some institutions and their practices that they simply want to return to the policies of the past,” Mr Brown said.

“There is no support in any part of the world for failing to take the action that is necessary and I believe that we will be able to agree on a structure for how bonuses should be examined in the future.”

But the US and UK have rejected calls for mandatory caps on bonuses.

“The G20 should commit to agreeing to binding rules for financial institutions on variable remunerations backed up by the threat of sanctions at the national level,” said the agreed statement.

The EU leaders will also urge the G20 nations to maintain stimulus spending that has prompted some signs of global recovery.

French President Nicolas Sarkozy, who has led the charge against high levels of banker pay, has threatened to walk out of the conference if no stringent compensation rules are passed.

“The bonus bubble burst tonight,” said Swedish Prime Minister Fredrik Reinfeldt, whose country holds the EU presidency.

“We have agreed to say that enough is enough and we need to move away from the current culture of compensation based on short-term performance.”

But US President Barack Obama has repeatedly said he is against being over-prescriptive on pay.

“The president has been pretty clear that he supports a robust approach to executive compensation but has been reluctant to sort of set individual compensation levels,” said Mike Froman, deputy national security advisor for international economic affairs.

Mr Froman said the G20 was most likely to agree a “set of principles” on bonuses.

The UK, Germany, France and Italy are the only official members of the EU in the G20 - which brings together developed and emerging economies. The EU itself is the 20th member, though Spain and the Netherlands will sit in on the talks. (BBC).