Bid to curb bank bonuses returns to haunt EU

BRUSSELS (AFP) – European Union finance ministers face a potentially stormy Tuesday session fighting over whether curbs on bankers’  bonuses should be written into key new legislation controlling the security of banks’ core reserves.

A decision reached last week by the EU’s current chair Ireland and the European Parliament, would see bankers’ bonuses capped under the new law.

Proponents say this will prevent a repeat of a global financial crisis like the 2008 mortgage meltdown that triggered eurozone debt chaos, recession and mass unemployment across the continent.

But Britain and France, as is so often the case, appear at loggerheads going into the morning talks in Brussels on how to implement Basel III, an internationally-agreed set of regulations which tighten capital requirements.

Diplomats say the United Kingdom will not flinch from invoking the ‘Luxembourg Compromise,’ an archaic arrangement originally cooked up by French wartime giant Charles De Gaulle and that one diplomat described as a veto by another name – “an unofficial emergency brake.”

Despite a push by eurozone giants to secure a deal among Britain’s 26 EU partners, the EU remains “many months away in terms of a majority of member states taking a (final) stand,” according to this official.

The concern in Britain is the competitiveness of the City of London – home to the lion’s share of all EU financial business – vis-a-vis New York and Hong Kong.   However, that view is fiercely resisted in Paris and elsewhere. French Finance Minister Pierre Moscovici told reporters after eurozone talks on Monday night that City bankers could not escape the curbs.