PARIS, March 15 (AFP) – Taking its cue from Germany, the French government is looking at the pots of gold sitting in central bank vaults as a possible means to finance research, despite likely stiff political and legal opposition.
The need to invest in research in order to remain competitive internationally has pushed governments first in Germany and now in France to consider selling central bank reserves to generate funds for projects.
The Bank of France has 3,000 tonnes of the precious metal in the form of ingots and worth more than EUR 30 billion (USD 37 billion).
“These gold reserves are managed by the Bank of France but they belong to the nation,” a French ministerial source said.
Gold prices have been soaring – with an ounce hitting a 15-year high in January – at a time that the French government has promised researchers EUR 3 billion (USD 3.7 billion).
German Chancellor Gerhard Schroeder was in early February the first to raise the subject of selling gold to fund research, an idea that occassionally is brought up in Germany where the Bundesbank holds the second-biggest gold reserves in the world with 3,400 tonnes.
Several days later French Prime Minister Jean-Pierre Raffarin took up the idea, backing the sale of “gold surplus stocks to finance research” under the slogan “today’s gold for tommorrow’s gold.”
Then on March 4, former Socialist Finance Minister Laurent Fabius suggested that gold should be sold to finance social housing.
Nevertheless, the proposition faces numerous obstacles.
Firstly, the Bank of France cannot simply sell as much gold as it wants because of internationally binding agreements.
Last March 8, 15 European central banks, including France and Germany, agreed that as of next September they would sell no more than 500 tonnes of gold each per year for the period from 2004 to 2009.
At the political level, central banks – the guardians of gold reserves – are all independent from governments in the eurozone. They are also generally wary to see gold sold to finance current spending.
But Germany’s Bundesbank, which openly wants to sell gold in order to diversify its holdings, has suggested that some of the gains from selling gold reserves could be reinvested in a national foundation to support research and eduction.
However, the idea was rejected by all German political parties, which want to use pontential proceeds from a gold sale for the reduction of the national public debt.
In France, the central bank has signalled its opposition to selling gold for research spending.
A high ranking official at the Bank of France was quoted by the French business newspaper Les Echos as describing the idea as “crazy.”
In addition to the reticence at the central bank, Raffarin does not have universal support in his party for the idea.
“I don’t think it’s a good idea,” said Senate Finance Commission head Philippe Marini, who belongs to Raffarin’s center right UMP party.
Adding that “there’s no miracle formula” for public spending, he voiced opposition to “selling the family jewels to round off researchers’ monthly pay-checks.”
But despite the opposition, the idea is making the rounds in the circles of power in Paris.
An official from the French prime minister’s office said: “The idea raised by the Germans is being studied.”
“It’s been taken up for consideration, but nothing has been decided,” the official added.
Subject: France news