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WRAPUP 1-UK seeks EU action on bonuses, Greece in spotlight

Published 12/10/2009, 10:59 AM
Updated 12/10/2009, 11:03 AM

* Brown wants EU leaders to discuss bankers' bonuses

* Germany says EU leaders will discuss Greece

* Climate change also on EU agenda

By Timothy Heritage and Jan Strupczewski

BRUSSELS, Dec 10 (Reuters) - Britain urged European Union leaders to consider moves to tax bankers' bonuses at a summit on Thursday that was also likely to discuss debt problems in Greece.

Prime Minister Gordon Brown wrote to other EU leaders urging them to put bankers' bonuses on the agenda at the two-day summit in Brussels, which had been expected to focus on climate change.

Many voters blamed bankers for the global economic crisis and are angry they could now receive huge bonuses, even though some of their banks were bailed out with taxpayers' money.

Brown also wrote a newspaper article with French President Nicolas Sarkozy calling for an exceptional tax on global bank bonuses, and German Chancellor Angela Merkel described a one-off tax on such bonuses as a charming idea.

"Both preceding the crisis and again now, banks have made very large profits, and some of their employees have received bonuses equal to many multiples of average earnings in our countries," Brown wrote in the letter to EU leaders.

He wrote that "while the benefits of success are reaped by the few, the costs of failure are borne by the many ... We must therefore act to redress the balance of risks, rewards and responsibility between society and the financial sector."

He made the call one day after his Labour government said banks operating in Britain would be charged a 50 percent tax rate on employees' bonuses of above 25,000 pounds ($40,610).

France is considering similar plans, French government sources said. Merkel said Germany had committed itself to a transaction tax in the financial market and this was "a more sustainable solution to the problems".

"But still, I think the idea that arose in the City of London ... to have a one-off tax on managers' bonuses is a charming idea that maybe will produce a learning effect," she told reporters in Bonn.

GREEK PROBLEMS

Merkel said EU leaders would also discuss problems in Greece, an EU state whose debt and stock prices have taken a pounding following a downgrade from rating agency Fitch this week because of Athens' large budget deficit and public debt.

Greece has vowed to do whatever it takes to check its deficit, and the chairman of the group of 16 countries that use the euro said Greece would not go bankrupt and so needed no help from EU states.

Merkel said, however, that the euro zone countries had a shared responsibility for Greece's future.

"What happens in one member state affects all others, especially as we have a common currency, which means we have a common responsibility," she said.

She did not say what common responsibility would mean in terms of any action over Greece. But the EU is trying to put pressure on Athens to launch tough reforms without alarming financial markets that it could be left to its own devices.

"These comments hint that other euro zone member states will not let Greece fall down, while also suggesting that they will be very tough on the Greek government to make sure that it takes the necessary steps to stand on its own feet," said Nick Kounis, economist at Fortis bank.

"It's basically a confidence-building exercise and we are likely to hear more of these kinds of noises from the EU summit," he said.

The 27-country EU, which groups nearly 500 million people, will be determined to act quickly to stop any suggestion Greece could cause a wider crisis after the bloc drew criticism as being too slow to avert the global economic crisis last year.

"European policymakers are now realising that they are all in it together," said Marco Annunziata, economist at Unicredit financial group. "The truth is that euro zone member countries are all in the same boat for better or worse."

Member states injected large amounts of cash into their economies to staunch the crisis and are set at the summit to approve plans to create three pan-European watchdogs to oversee banks and financial services to help prevent another crisis.

BROWN, SARKOZY SEEK TO EASE TENSION

Brown and Sarkozy were due to meet before the summit to try to end tension over the appointment of a Frenchman to oversee a shake-up of European banking.

Their meeting follows comments by Sarkozy describing the choice of former foreign minister Michel Barnier as a victory for France and the European economic model, and a big loss for free-market Britain.

Both sides deny any rift but the meeting is a chance to clear the air over Barnier's future role in revamping financial supervision to prevent any repeat of the crisis.

The EU leaders were also due to discuss some countries' calls for agreement on a figure for financing to help developing countries tackle global warming in the three years before any deal agreed at international talks in Copenhagen takes effect.

The EU has pledged to cut harmful carbon dioxide emissions by 20 percent by 2020, compared to 1990 levels. But some leaders want to set the target at 30 percent if other big emitters agree an international deal on reducing the emissions. (Editing by Dale Hudson)

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