French President Nicolas Sarkozy and British Prime Minister Gordon Brown called for an exceptional tax on global bank bonuses in a joint newspaper column yesterday.
In the column published in yesterday’s Wall Street Journal, Sarkozy and Brown also proposed closer coordination of economic policy to correct global imbalances, and said such coordination should ensure exchange rate volatility did not threaten recovery. They said several proposals such as levies on financial transactions deserved to be examined.
“Among these proposals, we agree that a one off tax in relation to bonuses should be considered a priority due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system,” they wrote.
Sarkozy ruffled feathers in London when he boasted that the appointment of Frenchman Michel Barnier to oversee a shake-up of European banking was a victory for France and loss for free-market Britain.
Sarkozy and Brown were due to meet yesterday on the sidelines of a EU summit in Brussels and were expected to try and ease tension over the appointment.
The two have much to do to quell concerns in the City of London, one of the world’s biggest financial centers, that Barnier could push for even tighter regulation.
Brown and Sarkozy said they wanted G20 members to discuss a new process of deciding macro-economic strategy, and that through this process the world needed to “correct and prevent” global imbalances. Each country should play its part in reducing global imbalances, they said.
“We need to enhance coordination at the global level so that foreign exchange volatility does not create a risk for the recovery,” they said.
Meanwhile, British Chancellor of the Exchequer Alistair Darling yesterday defended his decision to delay cuts in public spending until after a general election next year which his government is expected to lose.
Darling, speaking one day after unveiling the government’s latest budget statement, said it was unwise to begin spending cuts and in turn reduce Britain’s ballooning public debt before the economy experienced firm recovery.
Britain is the last major world power in recession, after the eurozone, France, Germany, Japan and the US have all returned to growth in the wake of the worst global economic downturn since the 1930s.
“Once we get recovery established then of course as a country we’ve got to reduce our borrowing and live within our means,” Darling told independent broadcaster GMTV.
“Of course there are some people who say we should go faster and further ... I don’t think that would have been right. I think it’s important that we continue to get ourselves through one of the steepest downturns we’ve ever seen,” he said.
Darling said on Wednesday that Britain’s longest recession on record would be deeper than thought. He told parliament that the economy would shrink 4.75 percent this year compared with a previous official estimate of 3.5 percent.
The economy is expected to grow by 1 percent to 1.5 percent next year, he said.
Britain’s newspapers have accused the government of failing to take tough decisions to slash the massive public deficit.
With headlines of “Pain delayed” and “Darling ducks tough decisions,” they said the government needed to rein in spending now. Darling wants the current budget deficit halved over the next four years.
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