Germany insists on no debt relief, Greece shows how much gold it has

Greece has €5.26 billion according to its central bank. But the chances of debt relief look slim. [Bullion Vault/ Flickr]

Greece must not be granted a “bail in” that would involve creditors taking a loss on their loans, Germany’s deputy finance minister said yesterday (26 February), as Athens announced how much gold it has in reserve.

“There must not be a bail-in,” Jens Spahn told German broadcaster Deutschlandfunk, according to a written transcript of the interview.

“We think it is very, very likely that we will come to an agreement with the International Monetary Fund that does not require a haircut,” he said, referring to losses that Greece’s creditors would have to take if debt was written off.

The IMF has called for Greece to be granted substantial debt relief but this is opposed by Germany, which makes the largest contribution to the budget of the European Stability Mechanism (ESM), the eurozone’s so-called bailout fund.

Greece and its creditors agreed last week to further reforms by Athens to ease a logjam in talks with creditors that has held up additional funding for the troubled euro zone country.

Inspectors from the European Commission, the ESM, the IMF and the European Central Bank are due to return to Athens this week.

Greece's lenders shift from austerity to reforms

The Eurogroup took a small step on Monday (20 February) towards the completion of the second review of Greece’s €86 billion rescue programme, placing the emphasis on reforms over austerity to reduce the country’s huge debt pile.

Spahn, a senior member of Chancellor Angela Merkel’s party, said Greece’s problem was a lack of growth rather than debt and giving Athens debt relief would upset other eurozone countries such as Spain that had to deliver tough reforms.

“Our Spanish friends, for example, say: ‘Hang on – that wouldn’t be fair: we carry out reforms and get no haircut and now you’re talking about giving Greece one?!'”

Spahn said Germany was campaigning hard to keep the IMF on board in Greece’s bailout because of its expertise in helping countries that need to deliver reforms in return for aid.

Manfred Weber, who leads the conservative bloc in the European Parliament, said this month that if the IMF insisted on debt relief for Greece, it should no longer participate in the bailout, breaking ranks with Berlin’s official line that the programme would end if the IMF pulled out.

A survey published on Friday (24 February) showed around half of people in Germany, Europe’s paymaster, are against granting debt relief to Greece.

Schäuble denies 'Grexit' threat, says Greece on right path

German Finance Minister Wolfgang Schäuble denied yesterday (19 February) that he had said Greece would have to leave the eurozone if it failed to implement economic reforms.

Meanwhile, Greece’s central bank said Saturday (25 February) that it held 149.1 tonnes of gold reserves at the end of December worth €5.26 billion, with about half kept in its vaults and the rest stored abroad.

Responding to a Greek newspaper report that half of its gold reserves had been handed over to the European Central Bank, the Bank of Greece said a small amount was transferred to the ECB when Greece joined the eurozone in 2001. The Bank of Greece then became part of the Eurosystem of central banks.

“About half of the gold reserves are in the vaults and have not moved in the last decades. The remainder is kept at the Bank of England, the New York Fed and in Switzerland,” the Bank of Greece said in a statement.

It said storing part of its gold reserves abroad was an international practice followed by almost all central banks.

“There has been no change in the last years, apart from very small fluctuations related to the buying and selling of gold coins.”

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The Bank of Greece said it sold 20 tonnes of gold in 2003 as part of portfolio management moves, converting some of the gold coins it had amassed into tradable bars of bullion.

Germany’s central bank announced earlier this month that it has repatriated nearly half of its foreign-held gold reserves ahead of schedule. The Bundesbank confirmed that 583 tonnes of gold has been shipped back to Frankfurt from New York and Paris.

Germany had kept much of its bullion oversees over fears of a Soviet Union invasion. Since the collapse of Communism those concerns have disappeared and in 2013 Berlin said it would start bringing back its gold. How it has managed to ship so much gold across the Atlantic especially has not been revealed.

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