G20 to Tackle Rift over Bankers Bonuses
LONDON: Sharp divisions between Europe and the United States over bankers’ bonuses were set to dominate talks between the finance ministers of the world’s largest and fastest-emerging economies here Saturday.
The Group of 20 ministers are using the meeting in London to prepare the ground for a Group of 20 leaders’ summit in the US city of Pittsburgh on September 24-25.
They have grounds for satisfaction that their coordinated policies have helped to ease the worst financial crisis since the 1930s, with France, Germany and Japan all returning to positive growth in recent months.
But as thoughts turn to post-crisis strategies and how to withdraw the massive emergency aid plans which states pumped into their economies after the credit crunch, the rift over bankers’ excessive pay is growing.
France has led the calls for action, with finance minister Christine Lagarde arriving in London with all guns blazing, warning of an “onslaught on bonuses”.
Lagarde said there was “no question of a return to the old rules” on bankers’ pay, which is blamed by many for encouraging a short-term pursuit of profit that helped to severely destabilise the financial system.
“Public opinion is horrified by the amount of compensation paid to traders,” she said.
France wants bonuses to be capped, in a call strongly backed by Germany.
But the United States and Britain, keen to protect the status of Wall Street and the City of London as the world’s leading financial centres, are opposed to the proposal for a simple cap.
British finance minister Alistair Darling dismissed the idea as “unenforceable” because top bankers would simply find other ways to reward themselves.
“You can have a cap on a bonus, but if somebody really wanted to get around it, they would just raise their basic salary or arrange for money to be paid in some other way,” Darling told Sky News.
Lagarde was unimpressed, saying Britain’s European partners were not prepared to let it off the hook.
“As far as governments are concerned, their responsibility is not to the City (of London), it is to the public,” she said. “The City cannot be above the rules.”
A year on from the collapse of US banking giant Lehman Brothers that caused credit markets to seize up, the global economy is showing signs of recovery.
But the message from London is that there is no room for complacency.
Most countries agree it is important to start preparing exit strategies now, to claw back the massive fiscal stimuli injected into economies at the height of the crisis, but opinions differ on when they should be implemented.
Swedish finance minister Anders Borg sounded a note of caution Friday, saying the world was still “standing in the ashes” of economic catastrophe.
“When you’ve just come out of the ashes, it’s not time to call off the fire department,” he added.
“I think it’s very reasonable that during 2010, we will keep both monetary and fiscal policy expansionary but having said that, it is also very, very important that we start to talk and plan our exit strategies.”
Meanwhile, major emerging economies Brazil, Russia, India and China said it was “too early” to talk of an end to the crisis.
Brazilian finance minister Guido Mantega added that “the exit should be gradual” because withdrawing the state aid to economies too quickly “would not send a good signal to the markets.”
The meeting is also likely to consider calls for greater regulation, with the United States pushing for stronger capital and liquidity standards for banks so they can absorb any future losses without needing state help.
“(The) regulatory framework failed last year,” US Treasury Secretary Tim Geithner wrote in Friday’s Financial Times.
“Strengthening capital requirements is an essential part of a broader effort to modernise our regulatory framework so that the financial system is strong enough to withstand the failure of large, complex institutions,” he added.
G20 to Tackle Rift over Bankers Bonuses was first posted on September 5, 2009 at 2:09 pm.
©2009 “News Trends“.
US Airlines Traffic Declines in Month of August
NEW YORK: Most major U.S. airlines reported another month of declining traffic in August as rising unemployment hurt leisure demand and corporate cost cuts continued to hamper business travel.
Seven of the nine largest U.S. carriers reported a drop in traffic in August, except Southwest Airlines and JetBlue Airways Corp.
Delta Air Lines, the world’s largest carrier after its merger with Northwest last year, saw its traffic slump for the eighth straight month.
Dwindling demand has forced carriers to cut capacity this year to keep planes full. Nearly every carrier, except JetBlue, reported a drop in available seat miles for August. Load factors, a measure of how full a plane is, were mostly higher.
Delta is among the carriers slated to cut capacity even further in the fall.
“September is going to be very challenging,” said Stifel Nicolaus analyst Hunter Keay. “Corporate travel remains on the sidelines.”
Still, airlines have started to see some signs of improvement.
“We remain encouraged that recent booking and yield improvement trends are continuing into September,” said US Airways Group President Scott Kirby in a statement.
Traffic for US Airways was off nearly 4 percent in August, while capacity fell 3.8 percent. The carrier reported a load factor of 85.7 percent, flat from a year ago.
US Airlines Traffic Declines in Month of August was first posted on September 5, 2009 at 2:19 pm.
©2009 “News Trends“.
