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
Sport
Lionel Messi pictured after reaching the final
world cup 2014
Sport
Lionel Messi and Thomas Muller have shone brightest for Argentina and Germany respectively on their way to the World Cup final
Sport
Brazilian fans watch the match for third place between Brazil and Netherlands
Brazil 0 Netherlands 3: Dutch pile on the misery in third place playoff
Arts and Entertainment
TV The follow-up documentary that has got locals worried
PROMOTED VIDEO
Arts and Entertainment
Eminem's daughter Hailie has graduated from high school
music
News
Ian Thorpe had Rio 2016 in his sights
people
Arts and Entertainment
Original Netflix series such as Orange Is The New Black are to benefit from a 'substantial' increase in investment
TVHoax announcement had caused outrage
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
One Direction star Harry Styles who says he has no plans to follow his pal Cara Delevingne down the catwalk.
peopleManagement confirms rumours singer is going it alone are false
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Arts and Entertainment
'Deep Breath' is Peter Capaldi's first full-length adventure as the twelfth Doctor
TVFirst episode of new series has ended up on the internet
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
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

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

Anyone but Argentina – why Brazilians don’t love their neighbours any more

The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

The Open 2014

Time again to ask that major question - can Lee Westwood win at last?