Bundesbank: central bank reserves will not help fund EFSF

FRANKFURT/BERLIN Sat Nov 5, 2011 3:55pm EDT

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FRANKFURT/BERLIN (Reuters) - Germany on Saturday rejected media reports that Bundesbank reserves would be used to fund the euro zone's rescue facility after German newspapers said Group of 20 leaders had discussed the idea of tapping central banks.

The Frankfurter Allgemeine Sonntagszeitung (FAS) reported that Bundesbank reserves -- including foreign currency and gold -- would be used to increase Germany's contribution to the crisis fund, the European Financial Stability Facility (EFSF) by more than 15 billion euros ($20 billion).

The European Central Bank (ECB) would own the reserves, according to the paper, citing sources at the G20 meeting held in Cannes this week.

The Welt am Sonntag newspaper, citing similar plans, said 15 billion euros would come from special drawing rights (SDR) that the Bundesbank holds.

"Germany's gold and foreign exchange reserves, which the Bundesbank administers, were not at any point up for discussion at the G20 summit in Cannes," government spokesman Steffen Seibert said.

G20 leaders in Cannes discussed the idea that the European System of Central Banks could pawn their total foreign exchange reserves of 50-60 billion euros to a trust of the European crisis fund in the form of special drawing rights from the International Monetary Fund (IMF), the newspapers said.

"We know this plan and we reject it," a Bundesbank spokesman said.

Seibert said several partners had raised the question in Cannes whether SDRs could be used to strengthen the EFSF but Germany had rejected this plan and discussions at Monday's Eurogroup on Monday would not discuss this topic.

The newspapers had said the issue was taken off the agenda at the G20 following Bundesbank opposition but that it would be debated on Monday at a Eurogroup meeting of euro zone finance ministers.

(Reporting by Harro ten Wolde, Annika Breidthardt and Marc Jones; Editing by Mark Heinrich)

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Comments (1)
wootendw wrote:
As many of the euro countries have gold reserves that are larger than the US’ on a per capita basis and total more than the US on an aggregate basis, this could be an opening feint to back the euro with gold. As the EU is not constructed as a fiscal entity with an EU-wide tax system, a gold standard would work much better for them. The price of gold would would have to be set much higher than the current market price of gold in order to back all the printed euros. This would be inflationary but that’s what governments seem to prefer right now as deflation scares the heck out of them. Under a euro gold standard, were the price of gold set to, say, €5000/ounce, anyone holding gold would suddenly have a lot more euros with which to buy Mercedes or Fiats or service euro-denominated debt, thus helping the eurozone countries’ balance of payments and budget problems. Moreover, miners throughout the world would go into overtime to dig up more ‘euros’, thus causing price inflation in the eurozone. Workers in the eurozone would get paid with cheaper euros but that might be better than losing their jobs as is currently the case. Lenders would be repaid with cheaper euros but that’s surely no worse than the 90% haircuts they are eventually going to get. After a few years, prices and wages would catch up to gold and thereafter there might be some stability.

Nov 06, 2011 11:17am EST  --  Report as abuse
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