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German central bank warns against government gold scheme

May 28, 1997

BONN, Germany (AP) _ Germany’s powerful central bank Wednesday accused the government of interfering in its affairs with a plan to revalue gold and currency reserves so the country can qualify for the single European currency.

Chancellor Helmut Kohl denied the charge, saying the government would press ahead with efforts to resolve legal issues surrounding the revaluation so the plan can go into effect this year.

It was a rare clash between the Bundesbank and Kohl’s government over the authority of the independent central bank. The plan has been widely criticized as an accounting maneuver of the kind Germany has repeatedly warned its European Union partners against.

Germany and others in the 15-nation EU are struggling to meet strict criteria on government debt and budget deficits to participate in the single euro currency, scheduled to be launched in 1999.

Finance Minister Theo Waigel has proposed that the book value of the nation’s gold reserves be increased to create new revenues for the government so it can meet the EU criteria. A large public debt and new holes in the government’s budget have raised questions about whether Germany, the EU’s strongest economy, will qualify.

Germany’s gold reserves have a book value of 17 billion marks ($10 billion) but a market value of 57 billion marks ($33.5 billion). Waigel wants to increase the book value and transfer the profit to government coffers.

But the Bundesbank’s governing council, after examining the plan at a meeting Wednesday in Frankfurt, warned it ``can be seen ... as interference in the independence of the central bank.″

It also said the revaluation could cause ``a loss of confidence in the stability of the future European currency.″ The central bank controls the nation’s gold reserves.

But Kohl and other leaders of his ruling coalition issued a joint statement minutes later saying ``the necessary adjustments shouldn’t wait until 1999.″

``The planned adjustment of the reserves in no way infringes on the successful stability policy of the Bundesbank, its independence and its sole responsibility for monetary policy,″ said the statement by Kohl, Waigel and other coalition leaders.

The Bundesbank, meanwhile, denied a report in the Frankfurter Rundschau newspaper that its president, Hans Tietmeyer, intends to resign over the dispute.

A rumor spread through currency markets that Tietmeyer would resign, causing the dollar to make slight gains against the German currency, the mark.

But central bank spokesman Manfred Koerber said, ``This rumor is without any substance.″

Tietmeyer told the parliamentary budget committee the reserves’ book value should not be increased while EU countries are trying to meet the single-currency criteria, the Frankfurter Rundschau reported, citing a committee meeting transcript.

A revaluation should be avoided ``in the sensitive period before currency union,″ the newspaper reported Tietmeyer as telling the committee.

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