Germany goes on gold raid to qualify for EMU

In its desperation to qualify for European Monetary Union, the German government is raiding the gold hoard of the Bundesbank.

Like a Wagnerian god, Theo Waigel, the finance minister, descended on Frankfurt yesterday, ordering the gnomes of the central bank to revalue their gold and foreign exchange, and to redeem some of the state's debts with the proceeds. No bullion will be sold, the government insists, but the price of gold fell on the first rumours.

Throughout its short history, the cautious Bundesbank has grossly underestimated the value of its gold, some of which is still stored in the central bank vaults of Germany's allies. In accordance with standard German practice, the bank records its assets at their all-time lowest price or at the purchase price.

A revaluation could bring a huge windfall profit to the bank. In gold alone, the Bundesbank holds 95 million ounces, originally acquired at an average price of DM144 an ounce, adding up to a total value of DM13.7bn (pounds 5bn). At the current market value of about DM600 an ounce, it would be worth about DM57bn.

This is the loot on which Mr Waigel has set his eyes in order to plug a hole in his budget. Germany, once the most disciplinarian among Europe's profligate governments, is on course for busting the Maastricht criteria in 1997, the qualifying year.

That much has been known for some time, but only yesterday, when an independent panel of government advisers issued their damning verdict, did Mr Waigel accept it. According to the panel, tax revenues this year would be DM18bn lower than forecast by Mr Waigel's ministry, equivalent to 0.5 per cent of GDP. Just over half the shortfall would be a hole in the central budget; the rest would be down to regional and local authorities.

With the official government forecast reckoning on a budget deficit of 2.9 per cent, this predicted shortfall takes government expenditure over the 3 per cent deficit ceiling allowed by the Maastricht Treaty. The loss in tax revenue is attributed mainly to this year's huge rise in unemployment and slower- than-predicted growth rate.

How the government will use the proceeds of its gold raid, which violates, if not the letter, then certainly the spirit of the Maastricht Treaty, is left unclear. Mr Waigel said that no cash would actually flow into state coffers. The Bundesbank surplus will be used to redeem debt accumulated in rebuilding East Germany. The government's gain is that it will no longer bear the burden of interest on these debts, thus reducing both the total figure for public debt and the annual total for public expenditure.

It is, according to one expert, "a fiddle". Under European Union rules, inspired largely by Germany, member states are not allowed to reduce their deficit by selling gold reserves. The rules are more ambiguous on the question of whether treasuries are allowed to tinker with the valuation of their assets.

Either way, Mr Waigel's manoeuvre is the sort of "one-off measure" of dubious legality which he has accused the Italians of perpetrating, and only slightly less "creative" than the French government's raid on France Telecom pensions.

Mr Waigel has also cast covetous eyes on the semi-privatised German telephone giant's hidden wealth.

After a successful flotation last year, Bonn still owns 74 per cent of Deutsche Telekom shares, which have risen by more than 40 per cent in value since their issue.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
Legendary blues and rock singer Joe Cocker has died of lung cancer, his management team as confirmed. He was 70
people70-year-old was most famous for 'You are So Beautiful'
News
people
Sport
Chelsea manager Jose Mourinho
footballLatest score and Twitter updates
Arts and Entertainment
David Hasselhof in Peter Pan
The US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
tech
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'