Sunday, 18 March 2012

EU ups its trade war on the City

Today's Sunday Telegraph has a full page splash entitled, "The German MEP and a threat to UK insurance". This relates to the Solvency II capital rules which if applied as they are currently framed will reduce private pensions paid to UK pensioners. This is why the Pru's chief executive talked last week about relocating the Pru outside the EU to escape these regulations. Note the contentious part of the rule changes, allegedly inserted at the request of Dr Frau Merkel will not affect German or French mainly state funded pensions nearly as much as UK private  pensions.

Pension funds will in effect be restricted to investing in sovereign bonds and not the higher yielding corporate bonds which incidentally directly finance industry. My old boss at the BoE deputy governor Paul Tucker said last week,"At the bank we are dismayed at how much it is costing the industry (insurance) and the regultor to adapt."

The irrelevance of UKIP MEPs to the process is shown by compromise discussions being discussed with Tory and Labour MEPs presumably because they understand a bit about these complex issues. What is the point of sending UKIP MEPs to Brussels who are not up to these jobs? Well the prime criteria for getting on a UKIP MEP slate is blind support for Nigel Farage. Talent, ability and experience is irrelevant.   

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