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Brown, Sarkozy urge market reform Brown and Sarkozy to talk banking
(about 3 hours later)
British Prime Minister Gordon Brown and French President Nicolas Sarkozy have issued a joint call for urgent global reform of financial markets. Gordon Brown and Nicolas Sarkozy are expected to use a meeting to discuss the controversial appointment of a Frenchman to oversee European banking.
Writing in the Wall Street Journal, they say a one-off tax on bank bonuses should be "considered a priority". The UK prime minister and French president are talking before a summit of European Union leaders in Brussels.
The two leaders say it is "simply not acceptable" for taxpayers to cover the cost of bank failures but not benefit from their successes. It will be the first time they have met since Mr Sarkozy appeared to boast that Michel Barnier's appointment was a defeat for UK free-market economics.
The article comes as EU leaders prepare to meet for a summit in Brussels. Earlier, Mr Brown and Mr Sarkozy issued a call for financial reform.
It also follows the announcement in a pre-Budget report by UK finance minister Alistair Darling of a one-off supertax on banker bonuses. This came in a jointly written article in the Wall Street Journal, in which they said that a one-off tax on bank bonuses should be "considered a priority".
'Proper regulation' Diplomatic row
The BBC's Jonny Dymond, in the Belgian capital, says the joint article at times reads like a call to arms. The talks between Mr Brown and Mr Sarkozy come two weeks after it was announced that Mr Barnier - a former French agriculture minister - would take the internal market post in the new 27-strong European Commission.
People rightly want a post-crisis banking system which puts their needs first Sarkozy/Brown joint article We must ensure that through proper regulation, the financial sector operates on a level playing field globally Gordon Brown and Nicolas Sarkozy
In it, Mr Sarkozy and Mr Brown say the financial crisis has made them "recognise that we are now in an economy which is no longer national but global, so financial standards must also be global". This position, which will give Mr Barnier responsibility for reforming the European banking sector, led to fears in the City of London that he might introduce excessive regulation that could stifle the decision-making freedom of UK banks.
"We must ensure that through proper regulation, the financial sector operates on a level playing field globally." Mr Barnier's appointment was said to have caused tension between London and Paris, not helped by Mr Sarkozy using a newspaper article to blame "Anglo-American" finance for sparking the crisis in the financial markets.
They say there is an "urgent need for a new compact between global banks and the society they serve". In the aftermath, a meeting due to take place last week in London between Mr Brown and Mr Sarkozy was cancelled.
"A compact that ensures the benefits of good economic times flow not just to bankers but to the people they serve; that makes sure that the financial sector fosters economic growth." Tony Travers, political scientist at the London School of Economics, said Mr Brown would probably be seeking assurances from Mr Sarkozy about Mr Barnier's plans.
Michel Barnier's appointment caused a UK-France spat "Britain will continue to want to ensure that regulation of all kind, particularly regulation of labour market and financial services, is not damaged by Franco-European policy making," said Mr Travers.
Various proposals to reform the sector "deserve examination", they said, but a one-off tax on high bonuses paid to bankers "should be considered a priority". For his part, Mr Barnier has said he would work for the interests of the European Union as a whole. He has been invited to London by UK Chancellor Alastair Darling for talks and a tour of the City of London.
"People rightly want a post-crisis banking system which puts their needs first. To achieve that, nothing less than a global change is required," the leaders wrote. The UK government has also said it is pleased that some of Mr Barnier's key advisers will be British.
France and the UK have been at odds recently over European banking. 'Urgent need'
Mr Sarkozy appeared to boast that the appointment of Frenchman Michel Barnier to oversee European banking reform was a defeat for Britain. Mr Brown and Mr Sarkozy's joint newspaper article came after Mr Darling announced in Wednesday's pre-Budget report that a new one-off tax of 50% would be introduced on banking bonuses of more than £25,000.
Mr Sarkozy told Le Monde newspaper the British were "the big losers" in the share-out of EU jobs. In their article, the UK prime minister and French president said the financial crisis had made them "recognise that we are now in an economy which is no longer national but global, so financial standards must also be global".
Mr Sarkozy and Mr Brown cancelled a meeting last week but are set to meet on Thursday on the sidelines of the EU summit. "We must ensure that through proper regulation, the financial sector operates on a level playing field globally," they said.
On Wednesday, Mr Darling announced plans for a one-off supertax of 50% on banker bonuses, to be applied to payments over £25,000. They added that there was an "urgent need for a new compact between global banks and the society they serve".
The new tax - which would be paid by banks and not individuals - is designed to discourage institutions from paying large bonuses to employees in the wake of the major taxpayer support they have received in the financial crisis. "A compact that ensures the benefits of good economic times flow not just to bankers but to the people they serve; that makes sure that the financial sector fosters economic growth.
"People rightly want a post-crisis banking system which puts their needs first. To achieve that, nothing less than a global change is required."