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The Group of 20 nations must agree "binding rules" on bankers' bonuses as part of concerted efforts to head off a repetition of the global economic crisis, Europe's top leaders said Thursday.
Prime Minister Gordon Brown of Britain, President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany also insisted that "the crisis is not over."
Speaking on the eve of G20 finance ministers' talks in London, the three called for a G20 summit later this month to outlaw guaranteed bonuses and said rewards should be based on long-term, not short-term, success.
The leaders of Europe's top three economies, who will join G20 counterparts in the United States for a September 24-25 summit, also said fiscal stimulus plans brought in to stabilise world economies must be fully implemented.
A joint letter from Brown, Merkel and Sarkozy to the Swedish European Union presidency was released before Friday's two-day meeting of finance ministers in London, which will lay foundations for the Pittsburgh summit.
They called for "binding rules" to regulate the behaviour of financial institutions on compensation including bonuses, plus transparency and governance.
Sarkozy has led calls for a mandatory cap on bankers' bonuses, an idea that won wider support at a meeting of European finance ministers in Brussels on Wednesday.
Britain, eager to safeguard the City of London's reputation as a major world financial centre, is cautious about a mandatory cap but wants to peg bonuses to long-term performance to discourage unnecessary risk-taking.
The United States is also likely to be wary of a mandatory cap.
Amid signs that the bonus culture is returning to some banks, the letter warned that returning to pre-crisis business as usual "is not an option" for major financial institutions.
Analysts argue that large bonuses -- particularly in Europe and the United States -- rewarded short-term profit and damaged the ability of bank executives to take well-judged decisions in the run-up to the crisis.
With Japan, France and Germany officially out of recession, the meeting of G20 finance ministers -- and later leaders -- will also consider what to do about the massive fiscal stimuli introduced at the height of the crisis.
Brown, Sarkozy and Merkel said that while G20 leaders must show they are "fully and firmly resolved to implement our stimulus plans," they should also "work on exit strategies to be implemented in a coordinated manner as soon as the crisis has ended".
Germany, wary of inflationary pressures, has talked up the need for exit strategies while Britain, which is still in recession, has been more cautious.
Finance minister Alistair Darling, the host of the meeting starting Friday, warned against complacency in an interview Thursday.
"The biggest single risk to recovery is that people think the job is done. There is a real risk that either governments or people generally think 'We have done that, we are on the path to recovery'," he told The Independent newspaper.
In addition to curbing bonuses, another major task of the G20 will be to persuade banks to build up more capital reserves to ensure that the collapse of such giants as Lehman Brothers of the United States, which sent markets tumbling a year ago, does not happen again.
Germany is also calling for the G20 to take measures to prevent banks from becoming so large that governments are held to ransom in future financial crises.
"No bank should be allowed to become so big that it can blackmail governments," Merkel said Monday.
The letter also called for the G20 to address this issue.
It suggested leaders look at whether supervision could be tightened for banks depending on how important they were to the health of the overall economy, plus "how such banks could be wound up if necessary without shaking the financial system."
