The British government has launched a legal challenge against EU plans to cap bankers’ bonuses.
Under EU law payouts to bankers will not exceed annual salaries, though they could be higher if shareholders agree.
British Chancellor George Osborne believes Brussels has gone too far with reforms aimed at avoiding the ‘casino banking’ that contributed to the financial crisis.
London is the biggest financial sector in the European Union and the government believes a cap will hurt the industry and push talent and money elsewhere.
Peter Dixon, an economist from Commerzbank, gives the bankers side of the story: “I think if you limit bonuses, it is something that provokes howls of discontent from people who work in the industry. Finance generally plays an important role in a modern industrialised economy. It is important that politicians recongnise what they actually have and don’t treat finance as they have other nationally important industries like cars over the past thirty years.”
The British government is now calling on the European Court of Justice, to rule the curb on bankers’ bonuses is illegal.
Critics say the Conservative-led UK government is taking on Brussels to stop its core supporters from defecting to the euro-sceptic UK Independence Party (UKIP).