Europe ups pressure on Obama over bonuses and climate
Europe's leaders gathered for a summit in Brussels on Thursday, bidding to spur Barack Obama into concrete action on bankers' bonuses and the fight against global warming.
The working dinner to prepare next week's G20 summit in Pittsburgh, Pennsylvania, was aimed at "persuading our American friends that a new code of financial conduct must be introduced," according to senior European finance minister Jean-Claude Juncker.
Luxembourg Prime Minister and Eurogroup head Juncker said Europe should act on bonuses "whether the Americans are with us or not," saying "the Americans will not be able to sit on the sidelines."
The head of the Washington-based International Monetary Fund, Dominique Strauss-Kahn, told US public broadcasters that curbs were needed both for "moral" reasons and to prevent a threat to economic stability from extreme risk-taking by powerful individual traders.
A top US presidential aide ruled out fixed caps on bonuses but the EU summiteers were set to call on G20 leaders to impose "sanctions" on guilty banks when the world's major economies and developing nations meet in the United States on 24 and 25 September.
The EU also wants the United States to pump extra money into the battle to tame climate change ahead of United Nations talks in Copenhagen in December that will try to drag global coordination on the issue out of a stifling quicksand.
After Obama lashed out at top Wall Street executives this week, a summit declaration in Brussels will seek to put the onus firmly on the White House to match the US president's words with action.
However, Mike Froman, US deputy national security advisor for international economic affairs, said Obama "has been reluctant to sort of set individual compensation levels."
A draft European Union summit statement seeking "binding rules" calls for handouts to be tied to long-term performance and an end to guaranteed bonuses.
It says financial police should be given powers to slash payments retrospectively and force boardrooms to control high-risk speculation.
Europe also wants to freeze stock options for set periods and expose top directors to penalties.
Politicians fear a backlash from taxpayers angered by bankers' use of massive injections of public money.
British Prime Minister Gordon Brown says lavish bonuses have "appalled everyone across the world," with many people blaming them for the credit crisis and the subsequent increase in unemployment.
Three US banks that were massive recipients of bailout funding, Goldman Sachs, Morgan Stanley and JP Morgan, each paid out billions of dollars more than they even earned in 2008 bonuses, according to a report from the New York attorney general's office.
But while the EU draft also calls for "exit strategies to be designed now," to turn off the taps of state financial support, Britain wants "to make sure we are out of the woods" first, according to one EU diplomat.
British Prime Minister Gordon Brown has said that "the stakes are simply too high to get these judgements wrong" by deciding exit timetables and strategies now.
Pressure is also mounting for a breakthrough on climate funding, although diplomatic sources said that here too Britain was finding itself in the opposite camp from France, Germany and others.
The summit draft says that the developing world will need EUR 100 billion per year by 2020 to tackle climate change.
France and Germany, as well as some of the eastern nations including the Czech Republic, Hungary and Italy, are reluctant to fix bloc-wide aid targets before they have even been discussed.
The UN climate negotiations are proving "difficult," according to US climate envoy Todd Stern as high-stakes talks got underway in Washington, with Britain's Foreign Secretary David Miliband forecasting a "real danger" of failure in Copenhagen.