EU gears up for fight over executive pay, bail-outsOctober 7th, 2008 - 4:18 pm ICT by IANS
Luxembourg, Oct 7 (DPA) The European Union (EU) finance ministers were braced for confrontation with the financial sector Tuesday as they met in Luxembourg to discuss the financial crisis in general and executive pay in particular.But their talks threatened to spill over into mutual recriminations after a weekend of shock national banking bail-outs and precipitous stock-market falls.
“What happened at the weekend was a great disappointment. If all countries try to solve the (problem) one on one, one country’s solution is the other country’s problem,” Swedish Finance Minister Anders Borg said as the meeting opened.
Over the last 10 days Europe’s attempts to forge a common financial policy have been left in disarray as one member state after another has stepped into its domestic financial markets.
Ireland’s move on Sep 30 to guarantee all deposits in Irish-owned banks, and Germany’s decision Sunday to guarantee retail deposits, have piled pressure on their EU peers to follow suit.
That has infuriated countries such as Sweden, Denmark and Britain, who feel that the German and Irish moves force them to boost their own guarantees or risk a flight of capital abroad, diplomats said.
On Monday evening, the finance ministers of the 15 countries which use the euro agreed to a set of principles which EU states should apply when they intervene in the financial markets.
Interventions should be short-term, should not harm competition and should be “in the interests of tax-payers,” the chair of the group, Luxembourg Prime Minister Jean-Claude Juncker, said.
The European Commission is working on proposals for a law boosting the minimum guarantee which member states must offer savers above the current level of 20,000 euros ($27,200), EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.
Governments should also have the right to change the management and executive pay schemes of failing banks, ministers agreed.
“There is no public support for excessive salaries and excessive bonuses, certainly if it’s pay for failure. And sadly enough, especially in the banking sector, we’ve seen lots of examples of that,” Dutch Finance Minister Wouter Bos said.
Asked what level of minimum deposit member states should guarantee, he said, “That’s what I’m going to discuss.”
Officials hope that the finance ministers of the EU’s 27 member states will back the Eurogroup proposals Tuesday.
“We think that if state aid is given to stabilize a bank, it must have consequences for the bank’s management as well,” German deputy finance minister Joerg Asmussen said.
Tags: domestic financial markets, finance ministers, flight of capital, great disappointment, jean claude juncker, joaquin almunia, minimum guarantee, national banking, prime minister jean, sweden denmark