More problems with that pact

According to Der Spiegel there is more dislike of the propose fiscal pact than anyone will openly admit to. But the high expectations awakened by Merkel are unlikely to be fulfilled. Several elements in the agreement are of questionable legality. It can't be written as an EU treaty because Great Britain won't sign it, which means it will only be an "inter-governmental agreement" between the 17 euro-zone countries and a handful of other countries participating voluntarily.

It's turning out to be a big handicap. On the one hand, the European Commission's hands are tied, because it can only act on behalf of all 27 EU members. Despite Merkel's wish, the Commission cannot legally take those that violate budgetary rules to the European Court of Justice. According to the fiscal pact proposal, national governments can only do this among themselves. But no country has ever taken legal action against another in EU history. Such a case would be seen as a gross violation of diplomatic etiquette.

Even if it comes to that, the authority of the European Court of Justice's (ECJ) remains in question. The treaty proposal states that the Luxembourg judges can impose fines of up to 0.1 percent of a country's GDP if they don't properly anchor the debt brake in their national law.

But these sanctions aren't actually provided for by EU law. In fact, they deviate from Article 126 of the Lisbon Treaty. And, according to Matthias Ruffert, a European law expert at the University of Jena, it is likely that all 27 EU members will have to ratify the fiscal pact for any ECJ sanctions to be binding.

Other lawyers argue that the sanctions would not be as binding as other ECJ verdicts. Because the fiscal pact terms involve only an intergovernmental agreement, they aren't EU law, which means they don't automatically come before national law, says European law expert Ronan McCrea, from University College London. Thus, in the case of an emergency, it would be easier for a national government to disregard such a verdict.

It comes to something when the pet project of the German Chancellor is dismissed by the Prime Minister of Luxembourg as being "a waste of time and energy". That is, apparently, what M. Jean Asselborne said.

Suing the ECB?

The Economic Voice among others reports that the UK Treasury is set to sue the ECB. Goodness me, what's that about? Actually, something rather serious:

The UK looks set to take the European Central Bank to court over its proposals to only allow clearing houses that operate within the Euro-zone geographical area to trade in some of the securities denominated in the single currency.

This would then force some institutions to leave the UK’s City of London for locations in Paris or Frankfurt.

Same old, same old, you might say. There is a new twist to this story of trying to destroy the City of London:

The London Stock Exchange is currently in talks with the intention of buying LCH.Clearnet, Europe’s last independent clearing house.

The problem is that under EU rules, which the UK Treasury says applies here, there is the presumption of free trade. But the ECB would presumably like to bring clearing into the 17 member Euro-zone for better control.

The UK Government will fight this proposal as it goes against the requirements of the larger EU of freedom of movement of services and capital as laid out in various treaties.

But as we all know, such considerations matter little.

This latest move could be interpreted as the Euro-zone just trying to get its house better in order or perhaps France and Germany manoeuvring to enhance their own financial services sectors. But it could also be construed as yet another move to marginalise the UK or even move it that bit closer to joining the Euro-zone.

The EU treaties have already been effectively torn up over the bailing out of countries such as Greece, as the treaties do say that bail-outs are not possible. So more breaches that are in the interests of the Euro are almost a certainty and are likely to be supported by the EU courts, whatever the UK says.

Nothing matters when the project and its outgrowth, the euro has to be defended.

There is more in the Telegraph:

The Government will launch its action on Wednesday and, if the ECB does not relent, will challenge the policy in the European Court of Justice. As well as breaking European law, ministers believe it contravenes international efforts to reform derivative markets through the G20, which has called for reforms to be implemented in an "internationally consistent and non-discriminatory way".

A Treasury spokesman said: "This decision contravenes European law and fundamental single market principles... That is why we have begun proceedings against the ECB through the European Court of Justice. The Government wants to see this resolved swiftly and without involving the courts, but if necessary will not shy away from continuing legal action."

We shall watch with interest.

HMG on that car insurance decision

Not sure what to make of the sudden explosion of International Women's Day events and celebrations in Britain. (I do hope, by the way, that none of this blog's readers will feel the need to make the obvious and uninteresting comment about there not being an International Men's Day.) Naturally, given the background, I grew up with knowledge of the festival and it is still taken very seriously where there is also a Men's Day, officially known as Defender of the Fatherland Day. Until recently, however, people in Britain (unless they had links of some kind with Russia or formerly the Soviet Union and its various satellites) looked blankly at me when I mentioned it.

As ever, the House of Lords led the way, as I noted last year: on March 8 all Starred Questions were about women's issues and there was a general celebratory air about the place.

Roughly speaking, the same thing happened this year as well though Credit Unions crept in, somehow, and there was less of an effort to make sure that women peers spoke. Then again, most of them do not need any special promotion. Of course, I do not speak of Baroness Warsi, who is an embarrassment to us all, men and women.

The question of the ECJ decision about car insurance for women came up under the heading of Insurance: Gender Discrimination. The problem here is not that if insurance companies "discriminated" it was because of certain business decisions based on what they thought was adequate evidence. (So, please, do not write to tell me about terrible women drivers you know. It is of very little concern to me and, in any case, that is not the point.)

Baroness Verma's explanation as to what happened summed up, once again, HMG's helplessness in matters of some importance as this decision will have all sorts of ramifications in the pension and insurance business:

My Lords, the UK Government, along with a number of other member states, the European Council and the Commission made oral and written representations to the European Court of Justice during legal proceedings. The representations argued that, rather than preventing true equality, the article in question ensured that different cases could be treated differently, thereby ensuring true equality. However, the court has ruled that the practice of using gender as a factor in the calculation of premiums and benefits must cease, with effect from 21 December 2012.

Subsequent questions and comments tried to elicit some assurance from the noble Lady that HMG will actually try to do something beyond "assisting" the insurance industry with its "can-do" attitude to the problem. Well, it is hardly their problem.

Oh and in case anyone thought of getting round the problem somehow, the Baroness could assure everyone "that any insurance sold in the EU, whether or not it is from outside the EU, will be applicable under these rules". Then again, where there is a will to competition, there is a way of getting round silly decisions which this country is bound to obey as long as it stays in the EU.

This sort of thinking leads to financial crises

The European Court of Justice is about to decide whether British insurance firms will be allowed to offer policies with lower premiums to young women or whether it can be said to infringe that magical concept, equality. This is what happens when business is controlled by people who do not have the faintest concept of basic economics and have never had to deal with any kind of financial issues.

There is a reason why young women get car insurance at more advantageous terms than young men: they are less likely to have major accidents, being more careful and less harum-scarum drivers. D'uh!

While equality is something we must all espouse when it comes to, for example, equality before the law (a concept that seems to be under pressure, as I hope to show in another blog), there is no equality as far as financial or actuarial risk is concerned. None. Insurance companies calculate quite carefully (though, undoubtedly, they sometimes get it wrong) what any individual's risk value is. It is not something that can be decided by notions of gender equality.

Then again, how different is this from our politicians demanding that banks lend money to small businesses regardless of whether they are a good risk or not? Or same politicians planning to set up a bank, using seized property and taxpayer backing in order to lend money to politically approved businesses regardless of their fiscal worth? Or, infamously, mortgage lenders being forced not to "discriminate" against certain applicants for mortgages on the grounds of them never being able to pay back what they borrow?