German Chancellor Angela Merkel and French President Nicolas Sarkozy will press fellow Group of 20 leaders to agree on rules limiting bonus payments and address the challenge of banks becoming "too large."
Merkel and Sarkozy, at a news conference Monday in Berlin, said they will outline the joint French and German proposals in a letter to the European Union to help formulate a unified EU position ahead of the G-20 summit in Pittsburgh on Sept. 24-25.
"Bonus payments are the thing that drives a lot of people up the wall," Merkel said, throwing her weight behind proposals outlined by Sarkozy last week for tougher limits on banker pay. In addition, no bank can be allowed to become so big "that it can blackmail governments," she said. "We need agreed international rules on how this can be ensured."
Merkel and Sarkozy, head of the euro region's No. 1 and No. 2 economies, have sought to present a joint agenda to overcome the global crisis and ensure that there is no repeat. Merkel, who will be running for re-election on Sept. 27, backed Sarkozy last week over what he called "the bonuses scandal."
"In Pittsburgh, we want the international community to understand that excesses of speculation and finance that led to the crisis cannot resume as though nothing had happened," Sarkozy said. "This is a common position of our two countries."
Merkel and Sarkozy joined forces ahead of the last G-20 summit in London in April to demand steps to control executive pay and rules governing hedge funds and new "architecture" for financial markets. Merkel has since voiced concern about possible backsliding on past G-20 commitments as the worst recession since World War II has eased.
"We mustn't waste this opportunity" in Pittsburgh, Merkel said. "To the surprise of many, we're noting in several financial centers of the world that the banks that got back on their feet again are behaving just like they did before the financial crisis. This mustn't repeat itself."
On Aug. 25 Sarkozy cajoled French banks into a promise to stretch two-thirds of bonus payouts out over three years and making a third of them in shares. On top of that, France will not give mandates to handle bond issues or other work to any banks that don't follow those rules, he said. Sarkozy also called on the G-20 to consider caps on both the total bonus pools of banks and individual bonuses.
The G-20 brings together leaders from industrialized and emerging nations including China, India and Brazil.