Slovenian Finance Minister and the President of the ECOFIN Council of EU Finance Ministers Andrej Bajuk, arriving for the regular monthly meeting in Brussels on May 14, 2008.

EU Finance Ministers on Wednesday termed excessive pay awards for company executives “scandalous” at a time when ordinary employees are under pressure to accept modest wage deals. In related news, Germany's President says global financial markets have become “a monster” and “must be put back in its place.”

“When we talk about wage moderation and the need to link wage increases with productivity increases, then we also have to say something about levels of remuneration that sometimes don’t seem to reflect productivity at all,” said Joaquín Almunia, the EU Monetary Affairs Commissioner.

He was speaking after the European Union Fiinance Ministers decided, during an informal discussion over lunch in Brussels, to tackle excessive pay in greater depth at a future meeting, expected to be after France assumes the bloc’s six-month rotating presidency in July.

Several ministers commented that with European inflation at its highest levels since the 1990s, squeezing the purchasing power of millions of workers and unemployed, private sector executives should show a greater sense of social responsibility.

New Irish Minister for Finance Brian Lenihan who was at the meeting, will get a special pay hike of 15% next year if a decision late last year to defer Irish ministerial pay rises to 2009, is not extended.

There was no agreement on specific measures on executives’ pay, but Almunia suggested that one answer lay in better corporate governance standards, with shareholders holding executives to closer account for their remuneration packages.

Almunia accepted however, that few companies appeared to have followed a set of recommendations on executive pay issued by the Commission in 2004.

“I have to tell you, looking at the results of a survey we did, that the degree of implementation of the recommendations was not very impressive,”said Mr Almunia.

Jean-Claude Juncker, Luxembourg’s prime minister, who heads the Eurogroup, comprising the 15 Eurozone Finance Ministers said: “We believe the excesses of captains of industry that we have seen in several countries are really quite scandalous . . . We have asked the euro countries to notify Almunia about what they are doing to combat this social scourge.”

He said rules should be tightened on “golden handshakes”, or payments made to executives when they leave their jobs and end their tax-deductible status.

Speaking on behalf of all 27 EU finance ministers, Andrej Bajuk, finance minister of Slovenia, current holders of the EU presidency, said: “There’s a general commitment from us all that this is a subject we have to take a serious look at.”

ECB President Jean-Claude Trichet has repeatedly warned of the risk of "second round effects" i.e wage hikes in response to high energy and food prices .

Also in Wednesday, it was reported that German President Horst Köhler – a former head of the International Monetary Fund – called for tougher regulations and the reconstruction of a “continental European banking culture” in response to global financial markets which have become “a monster” and “must be put back in its place.”

The German president compared bankers with alchemists who were responsible for “massive destruction of assets”.

Köhler referred to excessive executive pay, as a factor in the subprime crisis and accused bankers of acting irresponsibly.

“The complexity of financial products and the possibility to carry out huge leveraged trades with little [of their] own capital have allowed the monster to grow…also responsible [is] the grotesquely high compensation of individual finance managers.”

Bankers “have made huge mistakes”, Köhler told Stern magazine in an interview to be published today. He said in relation to the subprime crisis: “I am still waiting for a clear, audible mea culpa. The only good thing about this crisis is that it has made clear to any thinking, responsible person in the sector that international financial markets have developed into a monster that must be put back in its place.

“We need more severe and efficient regulation, higher capital requirements to underpin financial trades, more transparency and a global institution to independently oversee the stability of the international financial system. I have already suggested that the IMF assume this role.”

In Kilkenny on Wednesday, the president of Ireland's largest public service union accused employers of "new standards of double standards" in urging wage restraint for workers while pay at the top is soaring.

At the opening of Impact's biennial delegate conference, Finbarr O'Driscoll called on business leaders to show "some glimmer of understanding of the rage and frustration felt by ordinary people when top earners award themselves huge pay increases while telling the little people to tighten their belts".

He said that in the current national pay talks, unions were seeking increases that matched the rate of inflation simply to maintain living standards.

"We need to see some evidence that employers still see partnership as a two-way street, where all the parties make gains and sacrifices, but in recent months we have witnessed emboldened employers who are determined to row back on the rights and living standards that we have won for working people."