NATIONAL RESERVES:GERMANY HAS blocked plans to top up the financial firepower of euro zone rescue efforts by tapping national bank reserves for a new International Monetary Fund-backed fund.
Ahead of a euro zone finance ministers’ meeting today, Berlin has ruled out allowing the IMF to issue more special drawing rights – debt notes that struggling states can swap for cash.
Yesterday’s move came days after such a proposal was shot down at the G20 summit by German chancellor Angela Merkel – at the urging of Bundesbank president Jens Weidmann.
He told the German leader such a proposal could result in the central bank being obliged to cede reserves to the Washington-based IMF, encroaching on its prized political independence.
“The initiative was rejected by the German side,” said Dr Merkel’s spokesman, Steffen Seibert, yesterday.
Despite last week’s rejection in Cannes, EU officials are anxious to see the proposal on the agenda of today’s euro zone finance ministers’ meeting.
Mr Seibert dismissed German media reports yesterday that the plan to boost bailout funds, to aid Italy or another large euro zone country, would require Germany to sell off part of its gold and foreign exchange reserves.
“Germany’s gold and foreign exchange reserves, administered by the Bundesbank, were not at any point up for discussion at the G20 summit in Cannes,” he said.
Mr Seibert was responding to two newspaper reports yesterday of proposals to sell about €15 billion of Germany’s gold reserves, worth a reported €139 billion.
A Bundesbank spokesperson said it was aware of the plan and said the institution “rejected” plans to touch federal reserves.
The Sunday Frankfurter Allgemeinenewspaper said the initiative marked a fresh round in an ongoing struggle between the Bundesbank and the Merkel administration over reserves the bank manages on behalf of the German people.
Along with other European leaders, Dr Merkel is on the hunt for fresh sources of capital to replenish the European Financial Stability Facility (EFSF) should it be required to assist Italy.
A new fund in parallel to the EFSF, and managed by the Luxembourg-based institution with IMF involvement, could raise an additional €50 billion, according to reports.
The Bundesbank fears such a move, requiring capital injection from national banks, would open another door to what it sees as the creeping politicisation of the ostensibly independent ECB that began with its bond-buying programme.
Today’s finance ministers’ discussion is part of a wider strategy by the ECB to sound out the possibility of gaining control over the gold reserves of the euro zone’s central banks.
The ongoing search for fresh capital to top up the euro zone rescue fund follows a lack of interest from China, Brazil and others to invest directly in the existing EFSF.
Non-European G20 countries signalled, however, they might invest in a parallel rescue fund, with greater IMF involvement.