Paris insists no decision taken on gold sales

13th April 2004, Comments 0 comments

PARIS, April 13 (AFP) - The French finance ministry said Tuesday it was just thinking about using some of the country's gold for future investments or to reduce debt after press reports said talks could begin this week with the Bank of France.

PARIS, April 13 (AFP) - The French finance ministry said Tuesday it was just thinking about using some of the country's gold for future investments or to reduce debt after press reports said talks could begin this week with the Bank of France.

The financial daily Les Echoes said Tuesday that ministry and bank officials would mull possible gold sales after Finance Minister Nicolas Sarkozy said last week that the idea was worth looking into.

Any proceeds from such a sale would be minor compared to the massive French debt however, and in late March, Bank of France governor Christian Noyer tried to quash similar speculation, calling the issue "a debate that does not exist".

On Tuesday, the finance ministry acknowledged the central bank's prerogatives in the matter, telling AFP that bank officials would be involved in any talks.

In London, Societe Generale gold analyst Stephen Briggs told AFP: "I think that the market has been assuming already that France would become a seller even though nothing official has been said."

Reports in several French papers since Saturday "firms up something that probably the market was thinking would have to happen anyway" since an accord signed by European central banks in March put sales over five years at 2,500 tonnes, a figure that could only be reached if France and/or Italy took part.

Money released by gold sales would nonetheless represent little more than a symbolic gesture by officials pressed between serious deficit problems with the European Union and an electorate that slammed reforms in regional elections last month. Sarkozy has confirmed that France will respect a 2005 deadline for controlling its deficits.

Since France has been a stalwart supporter of gold reserves in principle - the last time it sold stocks was after widespread rioting and strikes in May 1968 - press reports commented that Sarkozy could simply be trying to send the nation a message.

It would signal that the government, in an example of rigorous management of resources, was pulling out all the stops to come up with cash, and not just asking individuals to bear the brunt of painful reforms which have, typically, sparked street protests and strikes.

It might also be interpreted as an incentive to the French to use their own savings, including substantial private holdings of gold believed to have been put aside for a rainy day, for consumption.

Sarkozy has put growth, coupled with correction of public finances at the top of his agenda.

He returned to the idea of gold sales during an interview Thursday on French television, while stressing that proceeds would be used to reduce the national debt or to finance investment.

In 1999, the so-called Washington Agreement by leading central banks, while stressing that gold remained central to the financial system, set restrictions on their gold sales. The agreement was renewed on March 8 in Basel, Switzerland.

Under the accord, France may sell 100 tonnes of gold a year for five years, earning about EUR 1 billion (USD 1.2 billion) per year at current prices.

The idea of an EU country dipping into gold reserves to fund research was mooted by German officials in February.

A few days later it was taken up by French Prime Minister Jean-Pierre Raffarin who faced protests over a lack of resources by French public-sector researchers.

France holds 3,024 tonnes of gold, the fourth-largest stock after the United States, Germany and the International Monetary Fund.

One idea under discussion now is to put money earned from gold sales into a special Bank of France account and draw on interest, which at an average rate of three percent would earn EUR 33 million a year, the daily Le Parisien said Saturday.

While that might pay for researchers' salaries and material needs, it would not even dent the French debt, which is nearing a trillion euros, or interest paid on the debt, which comes to around 40 billion, according to experts.

© AFP
       
                                                                 Subject: French news

 

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