Brown and Sarkozy call truce to declare war on bankers

Anglo-French relations rejuvenated after launch of joint offensive

Gordon Brown and Nicolas Sarkozy last night called a truce in their battle over how the City of London should be regulated and declared a joint offensive against excessive bonuses for bankers.

The Prime Minister and French President held a 30-minute tête-a-tête in the margins of a European Union summit in Brussels. A week ago, their meeting was billed as a showdown over inflammatory remarks by M Sarkozy, who declared that Britain was the "big loser" in the share-out of jobs on the European Commission and suggested that his French ally Michel Barnier would use his new post as Internal market commissioner to rein in the "excesses of Anglo-Saxon financial capitalism".

That embarrassed Mr Brown, who surrendered Britain's claim to the European economic job when Baroness Ashton of Upholland landed the new job of EU "Foreign Minister" last month. In the event, diplomats in London and Paris ensured that last night's "Gordo v Sarko" contest was a love-in rather than a fight. "Very convivial," Mr Brown's official spokesman declared afterwards.

The Prime Minister played down the spat over the Brussels posts, insisting: "That is not an issue because we have got the High Representative," saying that Lady Ashton was also the Senior Vice-President of the Commission.

There was plenty of mutual backslapping as the two leaders left the meeting and walked into the summit together. M Sarkozy was said to have made reassuring noises that the City was not in M Barnier's sights.

Events made the show of unity easy for the diplomats to choreograph. A one-off 50 per cent supertax on bankers' bonuses of more than £25,000, announced in Wednesday's pre-Budget report, is to be copied by France, it emerged yesterday. The two leaders also agreed on the need to protect taxpayers from losses incurred in bailing out the banks in a future financial crisis.

They also expressed a common interest in a global tax on all financial transactions, dubbed a "Tobin tax". In a letter to other EU leaders ahead of the summit, Mr Brown urged them to support the idea. The problem is that the Obama administration is at best lukewarm, at worst hostile, and it is difficult to see how such a tax could fly without America's support.

A French source said: "The tête-a-tête worked a treat – they came out of their meeting with huge smiles and big gestures. It was all jollity.

"Spats across the Channel are part of life, we're all used to it. Europe is used to them too. This will blow over."

He added: "The move to come together over bonuses was a good strategy. Brown wouldn't have gone ahead with his tax announcement on pay without knowing we'd follow suit, he wouldn't want to spark an exodus of bankers from Britain. It was all pre-arranged."

French officials said M Barnier would go to London and show he is not "the French monster" portrayed by the British media. "It's not as if he's got plans to trample over the city, he simply doesn't. It's incredible that this is how he's been portrayed," one said.

As an added boost for Mr Brown, Germany's Chancellor Angela Merkel described the clampdown on bankers' bonuses as "charming."