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
  • Get to the point
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

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence