At a special summit in Brussels European leaders on Thursday agreed that bonuses must be cancelled in case of negative development in the bank's performance. The proposed reforms would link compensation to a bank or business' performance and install a waiting period before stock options could be exercised.

German Chancellor Angela Merkel described the meeting as a "success" and said that demands from Germany, France and Great Britain were fully implemented and adopted as a European position. The three countries had called for bonus payments to be paid in line with banks' profits and for "guaranteed bonuses" to be stopped.

Merkel demanded a "charter for a sustainable economy" and British Prime Minister Gordon Brown called for a "new system of managing our global economy."

"Europe is going united to Pittsburgh with a clear and strong message: We don't want this to ever happen again," French President Nicolas Sarkozy said.

New rules of behavior

Seven EU member countries will be present at the Pittsburgh summit on September 24-25 and the bloc’s joint stance is expected to put pressure on the United States, which has so far resisted a global limit on bonuses.

"It will be the task of those who go to Pittsburgh to convince our American friends that we have to get the international finance community to accept new rules of behavior," Luxembourg Prime Minister and Eurogroup head Jean-Claude Juncker told German public radio.

He added that Europe should act on bonuses "whether the Americans are with us or not," pointing out that "the Americans will not be able to sit on the sidelines."

The European strategy focuses on capping bank managers' bonuses, tightening global financial supervision and coordinating efforts by governments to reduce the massive deficits that they have accumulated in attempts to mitigate the impact of the global recession.

The statement agreed on by the EU leaders on Thursday calls on the G-20 to "commit to a globally coordinated system of macro-prudential supervision, based on close cooperation of the International Monetary Fund, the Financial Stability Board, and the supervisory authorities, with effective exchange of information."

Disagreement over Tobin tax proposal

But there was some disagreement from the 27 EU members over proposals by Germany to levy a global tax on financial transactions that could act as a buffer against future economic setbacks.

Merkel failed to find enough backing from her EU colleagues for her proposal modeled on the original concept by Nobel Prize laureate James Tobin.

"I don't think that is the answer," said Swedish Prime Minister Fredrik Reinfeldt, whose country currently holds the EU's rotating presidency.

"It has been proposed in the past but I think it would be better to see coordinated measures of the kind we are talking about on the (bankers') bonus issue."

nrt/dpa/AFP/AP
Editor: Andreas Illmer