Just when it appeared the news cycle had moved on from Cyprus, the island nation came splashing back yesterday with news from the European Commission: Nicosia will be made to sell around three quarters, or €400 million (US$5.2 million), of its excess gold reserves. (“Excess?” Who has too much gold?)
What’s the big deal? ask some. When a person or nation is in a financial pinch, assets have to be liquidated.
True. But with Cyprus it’s not that simple. From the outset of this crisis, Cyprus has not been in control of its own destiny. Sure, Cypriot President Nicos Anastasiades was in on most, though apparently not all, of the discussions. Cyprus’s parliament voted on this and that, and ultimately “agreed” to the bailout agreement. But it was all smoke and mirrors. In the end, Cyprus was compelled to agree to a ruinous bailout package created and prescribed by Germany in consort with the European Commission, the European Central Bank (ECB) and International Monetary Fund. Now we learn from the Trioka that as part of the bailout agreement, Cyprus will have to sell the majority of its gold.
The important point to note is that this decision was effectively made by Germany and its ECB/EC/IMF allies, AND NOT CYPRUS.
We should note that Wednesday evening the Central Bank of Cyprus (CBC) denied the report that Cyprus will sell some of its gold. The announcement of the gold sale, however, came from the European Commission, which, together with the IMF and theECB, and under Germany’s direction, is actually responsible for drawing up Cyprus’s bailout. Also, the media and analysts paid little attention to the CBC’s denial and continue to report that this is happening. I wonder if the Central Bank of Cyprus simply hasn’t been told that it’s selling its gold?
What if Germany and the ECB make a play for gold owned by other ailing European economies?
Italy is the fourth largest holder of gold—its central bank holds 2,451 tons. France has the fifth largest stockpile in the world with 2,435 tons. The Netherlands has 612 tons. Portugal has about 383 tons. Spain’s holdings stand at 281.6 tons. Austria has 280 tons. Belgium 227 tons. Greece has about 112 tons. All totaled, the stockpile of gold if collected from ONLY the European nations mentioned above, including the ECB—but not including the IMF (as that gold technically belongs to all IMF members)—would come to roughly 10,674 tons.
That exceeds America’s stockpile by 2,540.5 tons!
That’s more than enough to bolster a centralized fiscal authority and underpin a newly revived European currency.
Nearly all these eurozone nations are experiencing extreme financial difficulty and will inevitably require further assistance. Meanwhile, Germany and many others in Europe recognize the need for greater fiscal consolidation and centralization. Is it inconceivable that Germany, as part of an effort to augment a central European fiscal authority and restore confidence in the euro, might compel the likes of Spain, France, Italy, Portugal or Greece, just as it has done with Cyprus, to sell some or all of their gold to the ECB? True, it wouldn’t be a simple or clean task (we’re talking about abdicating national sovereignty). But extreme crises like Europe is enduring demand extreme measures—just as we’re seeing in Cyprus.
When we step back and look at it, there are hints that Germany and the ECB might be pursuing some sort of larger strategy that includes consolidating gold.
Full article: Germany Snatches Gold from Cyprus (The Trumpet)