05/03/2013 03:01 GMT | Updated 05/03/2013 13:05 GMT

Osborne Fighting For Bankers' Bonuses In Brussels

George Osborne has been thwarted in his efforts to avert a controversial cap on bankers' bonuses.

The Chancellor headed to Brussels on Tuesday morning, vowing to fight the EU-wide measure which critics say will damage the City of London.

But his European counterparts are mostly in favour. At the meeting of finance ministers, Osborne was told the "broad majority" of the 26 other European Union nations were in favour of the new laws.

He had told them he could not support "the proposal currently on the table" at negotiations in Brussels.

Although the proposals, which limit bonuses to a maximum of a year's salary or double that if explicitly backed by shareholders, can still be fine-tuned, Tuesday's talks paved the way for a formal vote of approval by ministers next month.

UKIP seized on the failure to block the policy as an illustration of "how weak and ineffective" the British Government is in Europe.

The Brussels trip came with him under increasing pressure at home over the budget on March 20.


After the UK had its AAA rating downgraded by Moody's, and the Conservatives slumped behind UKIP in the Eastleigh by-election, Tory MPs have told him to "man up" and implement deep cuts to welfare and tax reductions.

The EU proposals add strict limits on salaries to a wider scheme forcing banks to increase liquidity and set aside more money to give extra help to small business.

Unless reversed by EU ministers, the new accord is due in force at the start of next year as another weapon in the armoury to stabilise banks against future economic shocks.

But the Chancellor says trying to peg bankers' bonuses by EU decree should not be part of the plan.

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British officials have protested that the cap on bonuses was never part of the terms of the "Capital Requirements Directive " being negotiated.

But under pressure from MEPs, Ireland, currently holding the EU presidency, agreed to the move to avoid a deal collapsing on a Directive which amounts to the biggest shake-up of the European banking system since the economic crisis began.