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Friday, 3rd February 2006 (6164 views)

The German government and the Bundesbank look set to lock horns over the future of Germany's massive gold reserves.

According to the Financial Times, the German government has drawn up legislation that would allow it to use proceeds from sales of the central bank's gold amounting to at least €1.5 billion.

A draft appendix to the 2006 budget seen by the newspaper stipulates that a special fund should be established for proceeds of gold sales, with the profits going to the federal government. The interest would then be used to fund research and education projects.

The Bundesbank has an option to sell 600 of its 3,427 tonnes of gold over a five-year period that began in 2004. However, the bank opposes the divesting of a portion of its gold reserves because it may be seen as capitulating to political pressure.

In a statement seen by Reuters, the bank insisted that the proposal "must not affect the autonomous decisions of the Bundesbank on assets and reserves".

"We will examine this closely," it added.

A spokesman from the finance ministry said that the draft, which also suggests large cuts to Bundesbank staff pay, was still being examined by the German finance minister. No decision had yet been taken to submit it.

The ministry estimated that an initial sale of 120 tonnes of gold could raise €1.5 billion.

 

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