Friday, September 18, 2009

EU leaders say exit strategy from fiscal stimuli must wait until recovery is sustainable

"The bonus bubble burst tonight" - so said Frederick Reinfeldt - the Swedish Premier after announcing the conclusions to a special EU summit yesterday. Reinfeldt said it was time for the talking to stop and time to take action on banker's bonuses.

Sounds pretty definitive - we can expect EU measures to unilaterally crack down on excessive rewards for risk-taking in the financial services. Reinfeldt, who chaired the Summit, said the public will not stand for profits to remain in private hands while losses come at taxpayers expense. Apart from holding the EU Preseidency, there is good reason to sit up and take notice of the Swedes when they start talking about learning lessons from the banking crisis. Their bail-out of busted banks in the 1990's and subsequently returning a profit for the taxpayer was the model for Gordon Brown when he led the international response to the global banking collapse. So it's a little disappointing that despite the hyperbole from Reinfeldt, his idea of remuneration caps do not feature in the informal common position - only a suggestion that it could be picked up at G20 as a multilateral solution.

Sarkozy, of course was keen on the bonus caps. Berlesconi less so - he says that acting on irresponsible speculation was much more important.

Apart from the economy, mitigation costs of climate change was he other big issue - the Commission wants to raise €100bn by 2020 for mitigation costs. Member States yesterday agreed to a commitment of €7bn upfront annual payments.

The main message, however from the Summit that the exit strategy from the fiscal stimuli should not be applied until the recovery is secured.

Summit Conclusions:

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