PITTSBURGH – Struggling with a contentious issue, world leaders have reached basic agreement on limiting the bonuses of bankers whose risky behavior contributed to the global financial meltdown, Treasury Secretary Timothy Geithner said Thursday at a summit of the world's largest economies. In the streets outside, protesters tussled with police on the opening day.
At a news conference, Geithner also expressed optimism that summit partners would endorse the broad outlines of a U.S. proposal to deal with huge imbalances in the global economy such as large trade surpluses in China and record budget deficits in the United States. He also said the U.S. supports China's efforts to gain greater voting rights in the International Monetary Fund over the reservations of European nations, who would lose influence.
Given the rise of China's economic powers, "it's the right thing," and Europe recognizes that, Geithner said.
World leaders descended on the comeback city of Pittsburgh to debate how to nurture a recovering but still-wobbly global economy. Nerves are still on edge, but this summit of the world's 20 leading economies seems free of the crisis atmosphere that hung over the past two — despite the clashes between protesters and police.
The treasury secretary said the G-20 countries had reached a consensus on the "basic outline" of a proposal to limit bankers' compensation by the end of this year. He said it would involve setting separate standards in each of the countries and would be overseen the Financial Stability Board, an international group of central bankers and regulators.
Until now, European countries had pressed harder than the U.S. for limits.
"We want to have very strong standards to limit the risks that compensation practices" encourage, Geithner said.
The issue of compensation has been one of the more difficult ones facing the summit.
Europeans in particular pressed for strict limits on salaries and bonuses for executives of financial institutions to keep them from being rewarded for the risky practices that contributed to the financial crisis.
"Europeans are horrified by banks, some reliant on taxpayers' money, once again paying exorbitant bonuses," said European Commission President Jose Manuel Barroso. Insisting "this is not a witch-hunt against bankers," Barroso said the EU was urging G-20 partners to stop the pay practice, "building on measures already taken in Europe and elsewhere."
The U.S. favors some restrictions but did not want numerical limits and wanted them linked to the health of the companies involved.
Geithner said that on Friday, the concluding day of the summit, "you will see a really far-reaching, pretty detailed set of standards."
He said that summit partners "made it clear that we are going to move in each country to put in place the mix of regulations, laws, advisory measures that are necessary to give those standards force."
The treasury secretary also reported progress in getting G-20 nations to go along with President Barack Obama's proposal to move toward eliminating government subsidies on fossil fuels such as oil, coal and natural gas that contribute to global warming.
Obama, who arrived from U.N. meetings in New York at mid-afternoon Thursday, chose Pittsburgh as the summit site because the formerly struggling Rust Belt city has transformed itself economically into a rebounding, environmentally conscious community with a diversified economy.
It is the third time within a year that the G-20 leaders have met to deal with the global financial meltdown.
Protests notwithstanding, the atmosphere is a lot more relaxed than at the fear-driven sessions in Washington last November and in London in April. Still, the global recovery remains fragile, with many big financial institutions under strain.
British Prime Minister Gordon Brown, speaking with reporters in New York before heading to Pittsburgh, said he hoped the group would agree to a new compact on jobs and growth. He warned, as President Barack Obama has, that nations should not move to quickly to end low-interest rates and stimulus spending packages.
"The recession is not automatically over," Brown said.