Brussels - European Union leaders are set to throw down the gauntlet to the United States, India and China on financial reform and climate change when they meet in Brussels on Thursday, according to a draft document seen by the German Press Agency dpa. The informal EU supper is meant to prepare a common position ahead of the Group of 20 (G20) summit in Pittsburgh on September 24-25.
According to the draft statement prepared by the Swedish government - current holder of the EU's rotating presidency - the bloc is set to challenge G20 members to draw up an immediate plan for how to reduce the massive deficits they have run up in trying to get out of economic crisis.
"Exit strategies need to be designed now and implemented in a coordinated manner as soon as the recovery takes hold," the draft says.
The call for the strategies to be designed now is likely to provoke controversy in the G20. A meeting of the group's finance ministers a fortnight ago agreed on the need for exit strategies, but said only that their timing "will vary across countries."
The EU draft also urges G20 members to crack down on the level of bonuses paid to top bank managers with "binding rules ... backed up by the threat of sanctions at the national level."
Those rules should allow national regulators to cut the bonuses paid to managers whose banks perform badly, and should "explore ways to limit" bonuses to a proportion of either total pay or total profits, the draft says.
The draft is equally outspoken on the need for G20 members to shake up, rather than prop up, their banking sectors.
"A restructuring of the banking sector must take place ... All G20 countries must adopt the Basel II capital framework," which sets out the rules on how much capital banks should hold, it says.
That reform should also boost international supervision of the world's biggest banks, so that they cannot run the kind of risks which triggered the current financial upheaval.
"The quality of cross-border supervision needs to be raised and the G20 should commit to work in a coordinated manner on this issue," the draft says.
While the EU summit is intended to focus on financial reform, the draft also issues a challenge to the G20 to take climate change seriously.
In particular, it calls on the wealthiest developing countries, such as Brazil, Mexico, China and India, to help poorer states fight global warming.
"All countries, except the least developed, should contribute to financing the fight against climate change in developing countries," the draft says.
On Thursday, the EU's executive, the European Commission, said that the fight against climate change is set to cost up to 118 billion euros (172.5 billion dollars) per year by 2020.
European taxpayers should pay from 2 billion to 15 billion euros towards that sum, depending on whether the bill is calculated according to the EU's current wealth or greenhouse-gas emissions, the commission said.
Using the same formula, the US would pay up to 12.6 billion euros, Japan 4.4 billion euros, China 7.9 billion euros and India 2 billion euros.
The G20 members are Argentina, Australia, Brazil, Britain, Canada, China, the EU, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States. Spain and the Netherlands are informal members.
