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Osborne tells finance ministers he wont back bonus cap Osborne tells finance ministers he wont back bonus cap
(35 minutes later)
 
Chancellor George Osborne has told European Union finance ministers that he cannot support proposals to curb bankers' bonuses.Chancellor George Osborne has told European Union finance ministers that he cannot support proposals to curb bankers' bonuses.
At a meeting of the EU's Economic and Financial Affairs Council in Brussels he appealed for further negotiations.At a meeting of the EU's Economic and Financial Affairs Council in Brussels he appealed for further negotiations.
The meeting discussed a possible "tweaking" of plans to limit bonuses to 100% of a banker's annual salary, or to 200% if shareholders approve.The meeting discussed a possible "tweaking" of plans to limit bonuses to 100% of a banker's annual salary, or to 200% if shareholders approve.
The City of London fears the rules will drive away talent and restrict growth.The City of London fears the rules will drive away talent and restrict growth.
Most members of the 27-nation EU are firmly behind the proposals, which are part of wider measures requiring banks to strengthen their capital buffers in the hope of avoiding another financial crisis.Most members of the 27-nation EU are firmly behind the proposals, which are part of wider measures requiring banks to strengthen their capital buffers in the hope of avoiding another financial crisis.
The proposals still need formal approval from the European Parliament and EU states.The proposals still need formal approval from the European Parliament and EU states.
Speaking after the meeting, Mr Osborne said Britain already had the toughest regime in Europe for bankers' pay and bonuses and that a cap could "have a perverse effect".Speaking after the meeting, Mr Osborne said Britain already had the toughest regime in Europe for bankers' pay and bonuses and that a cap could "have a perverse effect".
Although ministers could still push through the proposals without the UK's support, German Finance Minister Wolfgang Schaeuble said ``it would be better'' to reach consensus.Although ministers could still push through the proposals without the UK's support, German Finance Minister Wolfgang Schaeuble said ``it would be better'' to reach consensus.
But Michel Barnier, the EU commissioner for the single market, said high bonuses were behind excessive risk-taking by bankers. "Enough is enough. We've got to put a stop to that."But Michel Barnier, the EU commissioner for the single market, said high bonuses were behind excessive risk-taking by bankers. "Enough is enough. We've got to put a stop to that."
Mayor of London Boris Johnson has dismissed the idea as "self-defeating". London is the EU's largest financial centre.Mayor of London Boris Johnson has dismissed the idea as "self-defeating". London is the EU's largest financial centre.
On Monday, a spokesman for Prime Minister David Cameron said: "We continue to have real concerns on the proposals. We are in discussions with other member states."On Monday, a spokesman for Prime Minister David Cameron said: "We continue to have real concerns on the proposals. We are in discussions with other member states."
Mr Osborne is concerned that the bonus cap could push banking business, and its brightest talent, away from Europe and its largest financial centre, the City of London.Mr Osborne is concerned that the bonus cap could push banking business, and its brightest talent, away from Europe and its largest financial centre, the City of London.
So the UK is calling for flexibility, but it is struggling to find allies. Countries that often agree with the British position on financial services - countries like Sweden, the Netherlands and Germany - support this deal.So the UK is calling for flexibility, but it is struggling to find allies. Countries that often agree with the British position on financial services - countries like Sweden, the Netherlands and Germany - support this deal.
Tuesday's discussion will be followed by a formal vote in the European Parliament in May, and the cap on bankers' bonuses looks set to become law next year.Tuesday's discussion will be followed by a formal vote in the European Parliament in May, and the cap on bankers' bonuses looks set to become law next year.
That would mark an extremely rare defeat for the UK on financial legislation in Europe, a real break with how things have traditionally been done.That would mark an extremely rare defeat for the UK on financial legislation in Europe, a real break with how things have traditionally been done.
However, Mr Osborne's bargaining power may be weakened further by Switzerland's recent decision to cap bonuses paid to bankers and give shareholders binding powers over executive pay.However, Mr Osborne's bargaining power may be weakened further by Switzerland's recent decision to cap bonuses paid to bankers and give shareholders binding powers over executive pay.
Some EU ministers have looked with approval on the Swiss move, made in a national referendum on Sunday.Some EU ministers have looked with approval on the Swiss move, made in a national referendum on Sunday.
"The Swiss often show the way and personally I think we should take inspiration," said French Prime Minister Jean-Marc Ayrault."The Swiss often show the way and personally I think we should take inspiration," said French Prime Minister Jean-Marc Ayrault.
Speaking just before Tuesday's finance ministers' meeting, Irish Finance Minister Michael Noonan said there seemed little prospect of Mr Osborne winning over his eurozone counterparts.Speaking just before Tuesday's finance ministers' meeting, Irish Finance Minister Michael Noonan said there seemed little prospect of Mr Osborne winning over his eurozone counterparts.
"There is very little further that we can do for them (the British)... There isn't really any more room left," he said."There is very little further that we can do for them (the British)... There isn't really any more room left," he said.
Late on Monday, France's Finance Minister Pierre Moscovici said the deal would not be renegotiated.Late on Monday, France's Finance Minister Pierre Moscovici said the deal would not be renegotiated.
"Everyone must live with what is on the table," he told reporters after a meeting of eurozone finance ministers in Brussels. "I told George Osborne, when I was in London, these moral rules apply to everyone, even the City.""Everyone must live with what is on the table," he told reporters after a meeting of eurozone finance ministers in Brussels. "I told George Osborne, when I was in London, these moral rules apply to everyone, even the City."
'Unintended consequences''Unintended consequences'
Simon Lewis, chief executive of the lobby group the Association for Financial Markets in Europe, said the proposed measures were not just a threat to the City of London, but to Europe's competitive position in financial services.Simon Lewis, chief executive of the lobby group the Association for Financial Markets in Europe, said the proposed measures were not just a threat to the City of London, but to Europe's competitive position in financial services.
He told the BBC: "If this goes ahead, you will see the law of unintended consequences. Salaries will go up, there will be less flexibility, and the banks will be less competitive."He told the BBC: "If this goes ahead, you will see the law of unintended consequences. Salaries will go up, there will be less flexibility, and the banks will be less competitive."
Last week the Federation of European Employers questioned whether restrictions on bankers' pay exceeded EU powers.Last week the Federation of European Employers questioned whether restrictions on bankers' pay exceeded EU powers.
There has been speculation that the UK may try to invoke a little-used "national interest" defence to block attempts to curb bonuses.There has been speculation that the UK may try to invoke a little-used "national interest" defence to block attempts to curb bonuses.
The so-called "Luxembourg Compromise" allows a member state to block a majority decision being taken if an issue is deemed to seriously affect "a very important national interest".The so-called "Luxembourg Compromise" allows a member state to block a majority decision being taken if an issue is deemed to seriously affect "a very important national interest".
Some banks have reportedly taken legal advice on whether the EU's proposals are within the law, according to the The Financial Times on Tuesday. One bank had already received legal opinion that the bonus measures contravened European law, the FT said.Some banks have reportedly taken legal advice on whether the EU's proposals are within the law, according to the The Financial Times on Tuesday. One bank had already received legal opinion that the bonus measures contravened European law, the FT said.
Mr Lewis told the BBC that he "was sure" lawyers would be looking at whether the proposals were lawful, but added that "these are early days".Mr Lewis told the BBC that he "was sure" lawyers would be looking at whether the proposals were lawful, but added that "these are early days".
The European Commission has said that it is confident the proposals are legally watertight.The European Commission has said that it is confident the proposals are legally watertight.