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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: redfrecknj	12/21/2004 8:24:37 PM
	of 110194

A typical politician: From the Financial Times Simmering tensions between the German government and the country's central bank boiled over into a full-scale row last night after Hans Eichel, finance minister, criticised the Bundesbank for refusing to help ease government financial problems by selling gold reserves. Speaking in a Financial Times interview, Mr Eichel said the central bank's decision yesterday to sell only eight tonnes of gold in the next nine months was "very difficult to explain". Under an accord among 15 European central banks, the Bundesbank could have sold 120 tonnes by September 2005, a sale that would have brought government reve nues of about €1bn (£686m), according to Mr Eichel. Strains between the Bundesbank and the government have worsened in recent months, as the central bank has called repeatedly for Berlin to tighten spending. It has also criticised the government's proposals to ease the rules governing the European Union's stability and growth pact. Mr Eichel acknowledged that decisions over Germany's gold reserves were the responsibility of the independent Bundesbank. "It's in their responsibility, I respect that. But I get advice from Frankfurt often enough so I should at least be able ask questions," he said. He noted the central bank was isolated in refusing to sell large quantities of gold: "The Bundesbank will have to explain why it alone of the 15 central banks in the gold agreement is not exercising its sale option, despite the high gold price." The government is struggling to bring Germany's budget deficit next year under the 3 per cent level defined under the stability pact. Axel Weber, Bundesbank president, said yesterday the bank "did not see the necessity at this time to exercise its sales option. The reserves are part of the wealth of the people and have a high symbolic value." In comments likely to stir further tensions, he added: "Gold sales should not be an alternative to sustained budget consolidation [by the government]."

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