LONDON | Top finance officials from rich and developing countries agreed Saturday to curb bankers’ hefty bonuses, but the proposed crackdown on excessive payouts so far falls short of European demands after the U.S. and Britain shied away from imposing a cap.
The Group of 20 finance ministers also pledged to maintain stimulus measures such as extra government spending and low interest rates to boost the global economy, warning that the fledgling recovery that provided the backdrop to their meeting here is by no means assured.
“The financial system is showing signs of repair,” Treasury Secretary Timothy F. Geithner said. “Growth is now under way. However, we still face significant challenges ahead.”
The G-20 joint statement issued at the end of the London meeting said that fiscal and monetary policy will stay “expansionary” for as long as needed to reduce the chances of a double-dip recession.
The International Monetary Fund has said that the global economy is beginning a sluggish recovery from its worst recession since World War II, raising its estimate for global economic growth in 2010 to 2.5 percent, from an April projection of 1.9 percent.
But the IMF also downgraded its forecast for this year, saying the economy would shrink by 1.4 percent, instead of 1.3 percent.
The G-20 also pushed ahead with plans to reform the financial system, including tougher action against tax havens and giving developing countries a greater say in global governance.
French Finance Minister Christine Lagarde said this ensured that “things will not go back to business as usual … that there are no dark areas anymore to hide.”
But while the gathering - a preparatory session for the G-20 leaders’ summit in Pittsburgh later this month - reached agreement on the need for ongoing growth-boosting measures and some regulatory reform, it compromised on the hot topic of bankers’ bonuses.
Curtailing bankers’ pay and bonuses has been seen as key by some countries after the risk-promoting payment culture was blamed for fueling the current financial crisis.
British Treasury chief and meeting host Alistair Darling said there must be no more cases in which “people are being rewarded for reckless behavior.”
Heading into the talks in the British capital, European countries had pushed for the G-20, which represents 80 percent of the world’s economic output, to enforce an official cap on both individual payouts and collective bonus pots at financial institutions.
Britain supported the general effort to rein in bonuses, but not the cap, while the United States was more intent on pushing its proposal for a global accord to force banks to hold more capital reserves.
During the event, the G-20 agreed to give the Financial Stability Board, an international body established at the London summit of G-20 leaders in April, the task of drawing up practical proposals that the Sept. 24-25 leaders meeting in Pittsburgh could agree on.
The G-20 communique failed to directly address a proposal from Mr. Geithner for a new international accord to increase bank’s capital reserves, but he said he was encouraged by “support around the room.”
The G-20 includes 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States. The European Union, represented by its rotating presidency and the European Central Bank, is the 20th member.