UPDATE 1-France's Sarkozy softens tone on bonus caps

By Julien Toyer

BRUSSELS, Sept 17 (Reuters) - France is ready to accept a G20 agreement on bonuses that does not include caps as long as other measures to curb bonuses are adopted, President Nicolas Sarkozy said on Thursday, softening his earlier position.

He said the limit -- one of the ideas he proposed in August for next week's summit of the Group of 20 developed and emerging nations in Pittsburgh -- was a sticking point for U.S. President Barack Obama in talks on reform of the bonus system.

'The point which poses a problem is the overall limit of the size of the bonus. It is not a problem in the framework of the European position,' Sarkozy told a news conference after European Union leaders met in Brussels.

'But if we have precise engagements on all of the rest, a penalty on bonuses, bonuses paid over time, transparency at the time the bonus is decided, the extremely important question of capital levels ... we will be able to find an agreement. Those are the points we are discussing at the moment.'

Obama had rejected the idea of a cap on bonuses.

Earlier on Thursday, comments by Economy Minister Christine Lagarde in the Wall Street Journal, also appeared to be softening of the earlier French rhetoric.

Officials have said the bonus issue will be the most difficult regulatory subject to reach agreement on at the Sept 24-25 Pittsburgh meeting because of the differences between the U.S. and European positions.

Sarkozy said he believed Obama also wanted to end 'scandalous' bonuses that are paid to traders and other workers in financial institutions.

But he said there were other ways to make sure that huge bonuses, which have angered people facing the financial crisis and rising unemployment in many countries, were curbed.

'This question of a cap, we can look at it in different ways. We can do a number, and then we can also obtain the same results by imposing stricter rules on capital levels. And it is more this direction that we are taking,' Sarkozy said.

Sarkozy appeared to be backing proposals made on Tuesday by the Financial Stability Board, a group of central bankers and regulators tasked by the G20 with formulating a plan to limit bonuses.

The FSB said it would propose to the leaders in Pittsburgh, that the pool of money available in a bank to pay bonuses should be linked to its capital level. A lower level of capital would limit the amount of money available for bonuses.

Sarkozy said he thought this method was more efficient than imposing a simple cap at a national or European level.

A meeting of G20 finance ministers to prepare the leaders' meeting agreed earlier in September to claw back certain bonuses and ensure that such payouts were not guaranteed over several years.

(Writing by Anna Willard, editing by Timothy Heritage) Keywords: G20/EU SARKOZY (Reuters Messaging: [e-mail]; [phone]; [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.