The European Commission is considering tough new proposals to curb the pay and bonuses that banks can hand out to staff working across the European Union.
The plans, which are likely to go further than those proposed so far in the UK, would meet significant opposition from the City of London, which claims that cutting benefit packages would result in an exodus of talent to Asia and America.
But the new restrictions could not be blocked by the Government if a majority of other European countries vote in favour of them. The proposal by Michel Barnier – the EU Commissioner in charge of financial services – emerged as G20 leaders meeting in Cannes failed to produce concrete plans to tackle the eurozone's sovereign debt crisis.
In a dramatic day, the key developments included:
*The Greek Prime Minister, George Papandreou, last night survived a tense confidence vote in parliament, although subsequent demands for national elections from opposition parties put the next vital bailout instalment of €8bn in jeopardy.
*Markets fell sharply, as G20 leaders delayed until February a decision on refinancing the International Monetary Fund to help stricken countries.
*Leading countries outside the eurozone, including China and Brazil, indicated that they would not be prepared to invest money in a European bailout fund. Germany refused calls for the European Central Bank to take responsibility for the bailout.
*Nicolas Sarkozy reiterated calls for a Europe-wide financial transactions tax to be brought in by next year – despite opposition from Britain.
Speaking to The Independent in London, Mr Barnier described the situation facing Europe as "grave". In a move which will delight protesters outside St Paul's, he suggested it was necessary to do more to ensure bankers contributed "in a just way" to the fiscal retrenchment.
"After a couple of years of calming down, [banks] have gone back to pre-crisis levels of distributing pay and bonuses which are just not justified," he said, warning that, if they persisted, new regulations would be imposed.
"I can't give you all the details now of what the next steps will be [but] we will be preparing the next framework so we can limit bonuses and pay further," he said. Asked if the European Commission would introduce the new rules if the banks did not act unilaterally, Mr Barnier replied: "Exactly."
"It's not about penalising the banking sector," he added. "It's about asking that everyone play their role and make an effort to preserve the money available to finance the real economy."
Mr Barnier said the move was necessary because bankers were "feeding the sentiments of injustice too much".
He also announced he would be bringing forward new rules to regulate credit rating agencies – blamed by many countries for exacerbating the crisis.
He said at present there were too few companies involved, they were not transparent in their methods and many had conflicts of interest. He also backed Mr Sarkozy's call for a "Tobin tax" to be imposed on all financial transactions across the EU. He acknowledged this was opposed by the UK and, unlike a curb on bonuses, could not be adopted without British support. But he added: "I believe such a tax would be financially productive and politically just. The British already have a financial transaction tax – it's called stamp duty." When Mr Barnier was named EU Commissioner for the internal market and services in 2010, there was widespread suspicion in London that the French would use him to push restrictive regulation on the UK's financial centre.
But he argued: "I want to strengthen the City of London. The City was hit by the crisis. It needs solid foundations. That's why we are putting rules and transparency and supervision into place, where previously they had disappeared."Reuse content