Buba opposition to IMF gold sale seen softening
11:17 a.m. Mar 18, 1999 Eastern
By Scott Miller
FRANKFURT, March 18 (Reuters) - Germany's Bundesbank
may be ready to drop its long-standing opposition to selling gold
held by the International Monetary Fund, an important step
towards an international debt relief plan, analysts said on
Thursday.
The sale of IMF gold to raise funds for poor nations has been
hotly debated for years with the Bundesbank the most outspoken
member of a small group of interested parties opposed to
tampering with the IMF's reserves.
But the latest revival of a gold sale scheme, this time by U.S.
President Bill Clinton, may be too powerful for the Bundesbank to
oppose, especially given the changing role of gold in central bank
policies.
''I don't think the Bundesbank will keep up its opposition to gold
sales, said Wolfgang Wrzesniok-Rossbach, head of precious
metals and commodity trading at Dresdner Bank. ''The sales will
not do any real harm.''
The controversy surrounding gold sales resurfaced earlier this
week when Clinton proposed a $70 billion programme of debt
relief for poor nations -- a scheme which called on the IMF to sell
a small portion of its $29 billion gold stockpile.
The German central bank's position remains an important question
mark over the plan because of its influence over other national
authorities who are opposed to the sales.
The biggest hurdle the gold sale scheme faces probably will come
from the U.S. Congress where lawmakers may call for IMF
reforms as a condition for approving any sales.
Officially, the Bundesbank is sticking to its no-gold-sale stance,
claiming a divestment could be inflationary, undermine IMF
credibility, and possibly drive down global gold prices.
But analysts said that behind the scenes, those objections may be
starting to weaken.
Initially, economists expect the IMF to sell gold worth only around
$1.5 billion to $3.0 billion, a figure to small to fan global inflation.
''It is just not enough for the Bundesbank to have any real worries
about,'' said one analyst who asked not to be named.
Second, central banks are gradually placing less importance on
gold as the ultimate safe-haven investment. ''We see central banks
more actively managing their gold reserves, just like their currency
holdings,'' Wrzesniok-Rossbach said.
The new German goverment has embraced the idea of gold sales
with more enthusiasm than Helmut Kohl's administration, bringing
additional pressure to bear on the Bundesbank.
The August departure of Bundesbank President Hans Titemeyer, a
staunch monetarist, could also mean a rethink.
''For gold sales, they may have to wait until Tietmeyer goes,'' said
Ann Pettifor, who runs the UK arm of Jubilee 2000, a pressure
group campaigning to cancel unpayable debts of the poorest
nations.
Although the Bundesbank itself could not block IMF gold sales,
analysts say the central bank has been the linchpin of a group of
national authorities opposed to gold sales that has included those
of Italy, Austria and Switzerland.
IMF rules say gold sales would need the backing of member
countries holding 85 percent of the votes at the lending institution.
Germany has a share slightly over six percent, but the four nations
as a whole could muster 12 percent of the vote, which could
enable them to block a gold sale if other nations abstain.
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Copyright 1999 Reuters Limited. |
