European Commission forbids gold sale by Italy


Brussels Frees Italy from Gold Fever

By Paul Bompard
Financial Times, London
Thursday, August 9, 2007

ROME -- The European Commission on Thursday cut short a furious debate in Italy on the use of the Bank of Italy's gold reserves to lower the country's debt, saying it was up to the European Central Bank to decide independently on the foreign reserves of eurozone member states.

A suggestion by Romano Prodi, the prime minister, that the government might use the reserves sparked a political row on Wednesday with Paolo Bonaiuti, a spokesman for Silvio Berlusconi, the opposition leader.

Mr Bonaiuti declared that Mr Prodi was eager to divest Italy of its wealth to try to balance his budget. Maurizio Gasparri, a leader of the opposition National Alliance party, was critical.

The spokesperson for Joaquín Almunia, the European monetary affairs commissioner, said on Thursday: "It is ... up to the ECB to decide about the foreign reserves [including gold reserves] of the euro-area member states, in full independence."

In the Tuscan seaside resort where he is on holiday, Mr Prodi said: "It is positive that a debate exists over using the Bank of Italy's gold reserves. Some countries have done so. Others have not."

On July 30 Italy's parliament passed a resolution that suggested the government explore, at international level, the possibility of selling gold reserves to cut the national debt. The resolution was not proposed by the government, but Mr Prodi's words were seized upon by the opposition as a declaration of intent.

Silvio Sircana, Mr Prodi's spokesman, said: "I don't understand all the excitement. All he said was that discussion was positive. This in no way expresses the prime minister's position or that of the government."

Early this month Tommaso Padoa-Schioppa, the economics minister, said there should be no "taboo" regarding the central bank's gold. "But this does not mean he wants to sell it, and, in any case, it represents a tiny value compared to the national debt, hardly enough to make any difference," said an economics ministry spokesman.

Italy's accumulated national debt is about E1,609 billion ($2,223 billion, £1,090 billion), or 107 percent of GNP.

Even if the Bank of Italy were to sell all its 2,500 tonnes of gold, which it cannot do under existing European Union regulations, it would collect about E36 billion, only 2.2 percent of the national debt. If it sold all of the 500 tonnes per year -- the amount permitted by the 15 EU signatories of the 2004 Agreement of Gold -- it would cover 0.44 per cent of the debt. But this year only 206 tonnes are so far unreserved, less than 0.2 percent of the debt.

The Bank of Italy has kept silent. Unofficial comments from within indicate it is aware of parliament's sovereignty but also feels secure behind barriers of independence and autonomy.

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