Posted by: mbconsulting | June 25, 2010

To be or Not To Be? Romanian Pensions – Patrimony Rights

In Romania during the last month it was a lot of noise regarding the program proposed to be implemented for reduction of the budget deficit. There are two main elements proposed: reduction of the salaries paid from public funds and reduction of the pensions. During the last weeks intensive discussions were held regarding the reduction of pensions.

There were invoked by the lawyers and non – lawyers Romanian Constitution, European legislation and even the practice from CEDO and European Court. Mr. Georgy Frunda, a notable political person from UDMR, one of the most vocal person, said that the proposed measure for reduction of pension is not issued according with above mentioned legislation and the main element was PATRIMONY RIGHTS.

Hmm, I said to myself, I am not lawyer, but I am economist, and try to think about this and could not find any contradiction between reduction of pension and patrimony rights. Let me explain now.

Suppose that last year you bought a nice building for which you paid, let’s say, 100,000 USD. Now the prices are down, as a result of bubble. The market price for that building is now around 60,000 USD.

Does this mean that your patrimony rights over the building affected?Obviously NO. The building is still yours, but its price, the market value is lower. Is anywhere in this world a guarantee that the value of your patrimony will be the same tomorrow? No!!!.

This is similar with your pension: the patrimony right is with you: you still receive the pension, but the value of if is lower. Was my demonstration clear?

Were rich or poor people affected by the crisis that reduced the value of their patrimony during this crisis? Yes, and here you may mention Bill Gates or Warren Buffet.

What can you do to keep the same value for your patrimony during a crisis?

1. Protect yours assets against natural and human actions that may destroy them;
2. Speculate the value of your assets: sale the “bad assets” and buy new assets that are placed in an ascended value trend;
3. Invest in new assets in order to be added to the existing ones;
4. Invest in improvements for your assets that you already own.

Now, come back to the lawyers opinions are these were formulated by the Association of Retirees from Romania and made public in May 26, 2010.

Association has raised case Buchen ESC vs. Czech Republic (2006), and the European Court held that “unjustified restriction of a right recognized magistrate, such as a special pension, as subsequently ignored, with no objective and reasonable justification for such a restriction constitutes a deprivation of property under Article 1 of Protocol 1 of ECHR, but also discrimination in Article 1 of Protocol 12.

Case Gaygusuz vs. Austria (1996), the Court held that “pension is a property right under Article 1 of Protocol 1 of the Convention for human rights and discrimination found in Article 14, if lacking a reasonable objective justification for diminishing heritage applicant.

Case Akdeejeva vs Latvia (2007), the European Court of Human Rights ordered the Latvian State compensation setting that has been violated Article 6 of the Human Rights Convention and Article 1 of Protocol 1, if the recalculation is done down to pension, since it is a right won.

In the case Muller v. Austria, and in many other similar cases it was decided consistently held that “a substantial reduction in pension levels could be regarded as affecting the substance of ownership and even the very right to remain a beneficiary of the insurance system in old age. ”

The magistrates stated that a particular question was made at the ECHR and the EU Court on notions of “patrimony “and” expectation “.

“In accordance with Article 14 of the Convention on the prohibition of discrimination and Article 1 of Protocol 1 on the protection of the European Court of Human Rights held that” the concept of property includes any interest of private individuals that have economic value, so pension and, of course, entitled to pay are treated as property rights “(because Buchen vs. Czech Republic).

From this perspective, appears to be clear that the pension, as currently regulated, and with the amount specified by law constitute a “property right” within the meaning of the Convention and the Additional Protocols, and reduce the recalculation of this right would be tantamount to expropriation, “explains retired magistrates.

Tightening (of some rights) may be ordered only if necessary in a democratic society. The measure must be proportionate to the situation that caused it and must be applied without discrimination and without prejudice to the existence of right or freedom” as Article 53 stipulates in the Romanian Constitution that is invoked in the package of austerity measures proposed by the Romanian government.

I am really interested in your opinion regarding the patrimony rights and pension, and if cutting the pension will affect the patrimony rights.

Thanks for reading this post and waiting for your opinion,

Sincerely,

Unrested, still young and strong
Mbconsulting@live.com

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