The other day I tweeted about Cyprus needing to sell their gold reserves and based that information on a Reuters article. True to form, government officials from Cyprus denied those claims. Proving how Politicians lie, today, head of the ECB, Mario Draghi ordered Cyprus to ensure that any proceeds of any potential gold sale go towards their loan obligations with the ECB.
European Central Bank President Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks.
European creditors today left a possible gold sale in the hands of the Cypriot central bank, which manages 13.9 metric tons of the metal, according to the World Gold Council.
“The decision is going to be taken by the central bank,”Draghi said after a meeting of euro-area finance officials in Dublin. “What’s important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA.”
ELA stands for Emergency Liquidity Assistance, a lifeline that can be offered by national central banks in the euro region to commercial banks that can’t get funding.
Asked about a letter he wrote to Cyprus President Nicos Anastasiades, Draghi said the letter is “very, very clear.” He said the government must abide by the central bank’s handling of the gold stock, since it is independent from political control under European rules.
“The independence of central banks in the euro area is enshrined in the treaty,” Draghi said. “The ECB will look at developments in Cyprus from this angle.”
Speaking alongside Draghi, Dutch Finance Minister Jeroen Dijsselbloem said selling gold “has always been an option put forward by the Cypriot authorities.”
“But as mentioned in the program documentation, this is a decision to be made independently by the Cypriot central bank,”he said. “And it’s not any demand from the troika or the eurogroup.”
An April 9 debt assessment by the European Commission said that Cyprus had committed to selling around 400 million euros ($523 million) of “excess” gold reserves. The Cypriot central bank responded to that disclosure by saying it hadn’t discussed plans for a sale.
In a nutshell while this article doesn’t specifically order the sale of Cyprus gold reserves, you can see that this is the direction that the ECB is taking on this subject.
