-->Berlin and Bundesbank at Odds
Over Proceeds from Sales of Gold Reserves
By Birgit Marschall and Bertrand Benoit
Financial Times, London
Friday, February 3, 2006
http://news.ft.com/cms/s/8c59dc2c-945a-11da-82ea-0000779e2340.html
A long-running row between the German government and the Bundesbank
took a new turn yesterday as it emerged that the Finance Ministry
had drafted legislation that would give it access to proceeds from
sales of at least?1.5 billion of the central bank's gold reserves.
A draft appendix to the 2006 budget obtained by Financial Times
Deutschland states that future proceeds from gold sales should be
put into a special fund, with future interest to be transferred to
the federal government.
The government plans to use the interest to fund research and
education projects as part of its goal of increasing government
expenditure and investments aimed at boosting growth.
The ministry assumes an initial sale of 120 tonnes of gold could
raise?1.5 billion (£1 billion), translating into interest of?20
million to?60 million a year.
The Bundesbank has long opposed the government's requests that it
divest some of its gold reserves.
Although the bank is authorised under an international agreement to
sell up to 600 tonnes of gold by 2009, it has dragged its feet,
partly out of fear that a sale could be seen as a sign that it is
vulnerable to political pressure. Under current legislation, all
proceeds from gold sales must be transferred to the federal budget.
The measure"cannot be allowed to interfere with the independence of
the Bundesbank in the management of currency reserves," a spokesman
said yesterday. He said the bank would scrutinise the text for"any
signs of limitations being put on the functional and financial
independence of the bank."
The bank has threatened to bring the issue before the European
Central Bank, whose statutes prohibit government interference in the
management of central banks' currency reserves in the eurozone.
Bundesbank officials are understood to have leaked news of the draft
legislation in reaction to another part of the budget bill, which
foresees the phasing out of a 20 percent salary top-up enjoyed by
its 12,300 employees. Under the provision, one in a string of budget
cuts, the top-up is to be abolished within five years for all
Bundesbank employees working outside its headquarters.
Headquarters staff will get a 5 percent supplement, in line with the
salary top-up paid to most senior civil servants in federal
institutions.
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