European leaders ganged up Thursday against a favorite target — fat bonuses to bailed-out bankers.
British Prime Minister Gordon Brown and French President Nicolas Sarkozy agreed it was a good idea to slap higher taxes on performance pay, especially considering they are back on the rise soon after last year's financial meltdown that led to taxpayer-funded bailouts in some cases.
"We agree that a one-off tax in relation to bonuses should be considered a priority," the two wrote in an editorial in the Wall Street Journal.
Brown's government on Wednesday said it would impose a one-time 50 percent tax on 2009 bonuses above 25,000 pounds ($40,800). He also wrote a letter to his 26 fellow EU leaders at a summit opening Thursday, urging them to take quick action on climbing bank bonuses.
"Again now, banks have made very large profits, and some of their employees have received bonuses equal to many multiples of average earnings," he wrote.
"While the benefits of success are reaped by the few, the costs of failure are borne by the many. We must therefore act," he wrote.
German Chancellor Angela Merkel did not wait for the summit to start to throw the weight of the EU's economic powerhouse behind the idea.
She described Britain's tax as an "attractive idea" that might encourage some lessons to be learned in London's financial district.
Pay a share
"We have always repeatedly said, from the German point of view, that we want banks and their businesses to pay a share, that the burdens of the crises could be shared and not loaded on to taxpayers alone," she said at a meeting of European center-right leaders in Bonn, Germany.
An official in the French Finance Ministry said France has decided on a one-off tax for 2009 bonuses, and that France needed it to be accepted in other financial centers before working out details.
Last month France's government issued new rules to all banks operating in France — foreign banks included — that limited bonuses. The rules will force banks to spread out compensation over several years to ensure pay reflects long-term performance and doesn't reward risky decisions that soon turn bad. At least half of the bonus will be withheld, to be paid over three years depending on performance.
The bonus amounts and how they are distributed must be published each year.
Presidential spokesman Franck Louvrier wouldn't confirm published reports that France had decided to follow Britain with a 50 percent bonus tax, saying only that no decision had been made.
European Commission President Jose Manuel Barroso also warned that "we cannot have a simple return to business as usual and that would apply to the bonuses," his spokeswoman Pia Ahrenkilde Hansen said.
Heals a rift
The Brown-Sarkozy byline appeared to heal a rift in Anglo-French relations that opened over the appointment last month of Frenchman Michel Barnier to oversee EU financial markets, including the City.
Sarkozy had proclaimed victory over Barnier's appointment and denounced "Anglo-American" finance methods for causing the global economic meltdown. British bankers responded angrily, and the dispute reportedly scuppered a Sarkozy-Brown meeting in London last Friday.
But on Thursday they agreed "we must ensure that through proper regulation, the financial sector operates on a level playing field globally."
Attempts to impose similar bonus taxes in the United States have faltered in the Congress. The House of Representatives voted in March to impose a 90 percent bonus tax at companies that received at least $5 billion in federal bailout money, but a similar effort in the Senate to pass a smaller 70 percent tax covering a wider range of companies faltered.