Times are tough for Europe's top earners. Last week, the European Union agreed to introduce a cap on bankers' bonuses in a crackdown that will affect several thousand bankers in London alone. Then, this weekend in Switzerland voters handed shareholders a say on board and executive salaries in a bid to avoid exorbitant pay hikes.
These two decisions reflect a new mood currently sweeping the Continent. The skyrocketing pay of CEOs and boardmembers in various sectors was once seen as an inevitable byproduct of market economies, but it is no longer acceptable. Now, not even the suggestion that public disgust is rooted in envy holds sway with critics.
Across Europe, left-leaning politicians have welcomed the news from Brussels and Bern. "Long live the Swiss!" said Harlem Desir, leader of the French Socialists in an interview with broadcaster "France Info." The referendum in Switzerland marked a step in the same direction as the new cap on bonuses, which France had long been pushing for in Brussels, he said. "It is all part of the fight against a financial world that has gone wild, and can no longer be allowed to impose its own rules on the economy."
In Germany, the opposition Social Democrats were equally jubilant. Center-left Social Democratic Party deputy parliamentary floor leader Joachim Poss said that Germany should further tighten the cap on bonuses approved by the EU and extend it to other sectors, arguing that new laws inspired by the Swiss referendum were needed to curb soaring executive pay.
The days when resistance to astronomical CEO salaries was frowned upon even among Social Democrats are long over. In the 1990s, the party was keen to shed its working-class image and distribution of wealth was dismissed as old-fashioned. Modernizers such as former British Prime Minister Tony Blair and his German counterpart Gerhard Schröder set about lowering marginal tax rates and sought to curry favor with the captains of industry. "(We) are intensely relaxed about people getting filthy rich -- as long as they pay their taxes," said Peter Mandelson, a British Labour Party politician, who served in a number of Cabinet positions under Blair and was a key architect in the rebranding of the Labour Party as "New Labour."
The Times Are Changing
Now it is suddenly acceptable again for the state to interfere in questions of salary. "We need stronger rules against salary excesses in Germany too," says Green party parliamentarian Gerhard Schick, who focuses on financial market issues. Meanwhile, France's Socialist President François Hollande has been undeterred in his fight for a super tax. His planned 75 percent tax on incomes over 1 million was ruled unconstitutional by the country's top court, but he now plans to amend the measure. Paris is said to be considering a tax of 65 percent on married couples who earn more than 2 million in combined income.
Even in Britain's laissez-faire economy the times are changing. Mandelson's philosophy is outdated, says Olaf Cramme, director of Policy Network, a think tank sympathetic to his center-left Labour Party. Labour's leader Ed Miliband is a "Continental European Social Democrat" with fundamental sympathies for bonus caps and the redistribution of wealth, he says. But these aren't positions he's ready to reveal to voters just yet.
The Labour Party is caught in a quandary. The bankers' reputations may be just as bad in Britain as they are on the Continent, but the financial industry is an important economic driver and employer. Any attack on the City of London financial district is branded as unpatriotic, so the party has held back in the European debate over bonus caps.
Chancellor of the Exchequer George Osborne, the Conservative cabinet minister responsible for economic and financial matters, wants to question the new bankers' bonus cap once again when EU finance minister meet on Tuesday. But this is nothing more than a dutiful critique of the compromise already reached by the European Parliament, the European Commission and the rotating Irish EU presidency. No one expects anything more than cosmetic changes -- not even the British Bankers' Association.
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