By Birgit Jennen
Bloomberg News
Monday, June 23, 2014
http://www.bloomberg.com/news/2014-06-23/german-gold-stays-in-new-york-i...
BERLIN -- Germany has
decided its gold is safe in American hands.
Surging mistrust of the
euro during Europe's debt crisis fed a campaign to bring Germany's entire
$141 billion gold reserve home from New York and London. Now, after politics
shifted in Chancellor Angela Merkel's coalition, the government has concluded
that stashing half its bullion abroad is prudent after all.
"The Americans are
taking good care of our gold," Norbert Barthle,
the budget spokesman for Merkel's Christian Democratic bloc in parliament,
said in an interview. "Objectively, there's absolutely no reason for
mistrust."
Ending talk of repatriating the world's
second-biggest gold reserves removes a potential irritant in U.S.-German
relations. It's also a rebuff to critics including the anti-euro Alternative
for Germany party, which says all the gold should return to Frankfurt so it
can't be impounded to blackmail Germany into keeping the currency union
together.
The Bundesbank, Germany's
central bank, sent a delegation to the New York Fed's vault in 2012 for spot
checks on the hoard. As the gold's guardian, the Frankfurt-based Bundesbank
is obliged to ensure its safety. It says it's sensible to store part of the
reserves outside the country so they can be swapped more easily for foreign
currency in an emergency.
Germany's election in
September hastened the shift when the Free Democratic Party, which flirted
with bringing the gold home, dropped out of Merkel's coalition and was
replaced by the Social Democrats. Other supporters included Philipp Missfelder, a member of Merkel's Christian Democratic
Union who quit as her government's envoy for relations with the U.S. in
April. Juergen Hardt, his
successor, signaled a change of position.
Postwar History
"It's my view that
the gold reserves should be stored wherever they might be needed in an
emergency," Hardt, also from the CDU, told
reporters in May. There's no evidence that German gold at the New York Fed
has been tampered with, he said.
German gold reserves, the
second-biggest in the world after those of the U.S., totaled 3,386.4 tons on
March 31, according to World Gold Council data. Due to German postwar
history, the biggest part is stored at the Federal Reserve Bank of New York;
the rest is in London, Paris and Frankfurt.
After World War II and
the export revival of West Germany's "economic miracle" in the
1950s, the central bank accumulated dollars it swapped for gold at the
Federal Reserve. With Germany split between capitalist west and the communist
East German state until 1990, storing most of the gold abroad was a way to
keep it out of Soviet reach during the Cold War.
Gold Inventory
That the hoard had never
been counted and isn't fully on German soil for easy access was fodder for
critics.
Lawmakers including
Klaus-Peter Willsch, a CDU member who opposed
bailouts during the debt crisis, asked federal auditors for an opinion. Their
report in October 2012 increased pressure on the Bundesbank, urging it to do
an inventory and "physically ascertain" German gold holdings abroad.
The central bank met the
critics halfway. Last year, it began moving the Paris gold to Frankfurt,
pointing out that Germany and France now have the same currency, the euro.
Enough of the gold in New York and London will be brought home so half the
reserves will be in Germany by 2020.
German gold abroad is
stored "only at central banks of the highest international
reputation" in countries with "stable democratic structures"
and high security standards, the Bundesbank said in a presentation in 2013 in
response to bring-our-gold-home campaigners.
Storage Sites
"The Bundesbank
never doubted the integrity of the foreign gold-storage sites,"
Carl-Ludwig Thiele, the bank's council member for payments and settlements,
said in an interview on May 23. "We were able to see everything we
wanted to see in New York. As far as we're concerned, there are no more open
issues."
The Social Democrats,
Merkel's junior coalition ally, have signaled agreement with the Bundesbank
position. Campaigners at "Repatriate Our Gold"
also doesn't see the Bundesbank going further anytime soon.
"Right now, our
campaign is on hold," Peter Boehringer, a
Munich-based euro critics who co-founded an initiative to bring home all of
Germany's gold in 2012, said in an interview.
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