By PETER OBORNE Deferred pensions for everyone except, of course, our MPs World leaders are meeting this weekend for the G20 summit in Toronto amid the gathering global economic storm. First, there is the growing fear, reinforced by recent statistics published in the United States, that the world will slide back into recession over the coming months as major economies cut back on spending and withdraw the fiscal stimulus that helped the world out of recession earlier this year. Second, there is the danger that the European single currency will collapse. Run on the bank: In 2007, worried Northern Rock customers queued to get their deposits back At present, there is a dangerous complacency among political leaders that this won't happen. The widespread belief is that the bureaucrats who supervise the currency, such as the European Central Bank president Jean-Claude Trichet, are capable of keeping the euro afloat. However, I do not share this optimism. Instead, I'm convinced the euro will undergo its own version of Black Wednesday, the notorious day when sterling was forced to pull out of the Exchange rate Mechanism on September 16, 1992. At a stroke, John Major's government's economic credibility was destroyed. A similar disaster could happen at any moment with the euro, but the exact timing may be dependent on the outcome of the third factor confronting world leaders at the G20 summit. This is the risk facing the European, and in particular the Spanish, banking system. At present, many leading Spanish banks would be unable to pay back all their loans without the very generous support of the European Central Bank. This situation is not sustainable and we face the prospect of a second massive banking collapse, comparable in scale to the one that struck the world in the autumn of 2008. Not only are all these potential crises interlinked economically, they also share one common factor: the fact that the European political class shamefully underestimates the scale of the problems. In the face of this gross irresponsibility, the people of Europe have no choice but to take matters into their own hands and take the right precautions. Here are two essential pieces of advice. Anyone planning to travel to Eurozone countries during the summer should consider what has previously been unthinkable - the fate of euro notes and coins if the single currency falls apart. I believe it is inevitable that Greece and Portugal will pull out of the euro at some stage, and when that happens there will be little or no warning. In these extreme circumstances, the euros issued by these two countries might be converted back to drachmas and escudos - leaving the value of them in jeopardy. Of course, under European Central Bank rules the value of this money ought to be fully protected, but who knows what will happen if there was a major crisis. Certainly, on my travels, I'm going to be wary of accepting euro notes with serial numbers that are prefixed with the letters Y (coming from Greece) or M (from Portugal). I shall also strongly steer clear of notes with the serial numbers starting G (Cyprus), S (Italy), V ( Spain), T ( Ireland) and F (Malta). This might sound as if I'm being ridiculously alarmist, but you cannot be too careful. However, other euro notes should be reasonably safe. These include those marked Z (Belgium), U (France), l (Finland) and H (Slovenia-As for those with serial numbers beginning with X ( Germany), P (the Netherlands)and N (Austria), they can all be used with total confidence. Possible risk: Santander, which owns Abbey National, would be in a very difficult position if the Spanish banking system collapses My second anxiety is over the banks in the weaker European countries. The majority of these are now fundamentally unsound with weak balance sheets. We have reached the stage, I believe, where it is foolish for private individuals to deposit money with them. The same applies to the British banks and building societies that have been taken over by Spanish ones, such as Abbey National which was purchased by Bank of Santander several years ago. Santander is exceptionally well managed, by Spanish standards. But the fact remains that if the Spanish banking system collapses, then Santander will find itself in a very difficult position. This will obviously affect its British subsidiary, Abbey National. Those who have mortgages with Abbey National have little to worry about (because these are loans rather than savings). But Abbey National depositors should take care. Under law, the British government guarantees bank deposits held by private individuals up to a value of £50,000 and so this amount will be safe even if the worst happens. However, those with deposits of more than £50,000 may face problems. The British government is under no legal obligation to guarantee their money, and it is perfectly possible that Chancellor George Osborne may conclude that such wealthier investors should be left to take their own risks. While such uncertainty exists in the financial markets, investors would be unwise to lock up all their assets in Abbey National or any other Spanish-owned bank, particularly at a time when there are plenty of other safe alternatives. Many experts will undoubtedly claim I'm being unduly pessimistic by making these points. But very few economic summits have taken place against such a troubled background as this weekend's meeting in Canada. My other big worry is that world leaders, from Barack Obama down, have shown little more than the vaguest comprehension of the scale of the problems that lie ahead. The West is desperately lacking in politicians with the strength of vision to tackle such huge economic problems. Example: David Cameron is giving up his pension in a deliberate move to show he understands the anger at national pension plans Last week's announcement that the pension age is set to rise eventually to 66 and possibly beyond (for both men and women) is deeply painful for millions of hard-working people who have long dreamt of a comfortable and well-deserved retirement. But most people are public-spirited and patriotic enough to understand that such draconian measures are unfortunately necessary at a time of national economic emergency. They are ready to make the enormous personal sacrifices involved. However, there is one group of men and women who show no sign of the need to join this mood of national sacrifice. These are MPs. For years, they have ensured that their own pension arrangements are among the most generous and secure in Britain. Twenty years' service as an MP is enough to secure a pension for life of around £30,000 a year. What is more, it is the taxpayer, and not the MPs themselves, who bears the bulk of the cost of these lavish pensions. As beneficiaries of such gold-plated pensions, it is both disgusting and immoral that our governing elite should be forcing the rest of the population to work until they drop. Admirably, David Cameron this week agreed to give up his £66,000-a-year prime ministerial pension. And to his great credit, too, Gordon Brown has indicated he will not accept his prime ministerial pension. In view of these two men's lead, it will be interesting to see if Tony Blair does the same. But the chances seem unlikely. For I can reveal that at the time Mr Brown made it known that he would forego his PM's pension, downing Street officials relayed the news to Mr Blair in the hope that he would copy his successor's example. They were wasting their time. Mr Blair's all-too-characteristic selfishness apart, it is essential that all MPs should now give up their obscenely generous pension schemes. The expenses scandal showed that a great many of them were arrogant, greedy and hopelessly out of touch with the lives of ordinary people. It would be grotesque if the new Parliament were to pass legislation which will impoverish millions of people who are looking forward to a well-earned retirement while, at the same time, grubbily hanging on to their own generous pension plans.Why I'm going to be VERY careful where I put my money this summer
Deferred pensions for everyone except, of course, our MPs
Sunday, 27 June 2010
In these circumstances, it would be prudent if people took sensible precautions to protect their hard-earned financial assets.
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