TALK about the sell-off of the island’s gold reserves gained ground yesterday when the government said it could be used to reduce the public debt and interest payments.
It also sparked a debate among political parties, who are split over the issue.
Government Spokesman Stefanos Stefanou said the Finance Minster had already opened discussions on the issue with the Central Bank, the guardian of the island’s reserves.
The Cyprus Central Bank has an estimated £1.3 billion in reserves, mostly in US treasury bills. Only a “very small part”, some €350 million (£200 million) worth, is in gold. The gold is not actually on the island, but stored in vaults in various central banks abroad.
Stefanou, speaking after yesterday’s Cabinet meeting, said there had already been a lot of statements on the issue, most of which were not correct. The impression was that the government would be selling the gold to finance social handouts.
“The initial thought was that through the sale of gold the government aimed at reducing the public debt. It would also lead to a drop in the millions in interest the state pays each year. All of this will help the economic policy of the state,” he said.
In the political arena, only coalition partner DIKO, supported ruling AKEL in its stance on the gold.
DIKO deputy Nicolas Papadopoulos said the previous government had also raised the issue after Cyprus joined the euro zone in January this year.
Reserves were being held as a buffer to prop up the Cypriot pound in case of need but once in the euro zone, this became no longer necessary.
“Now that there is no such need, DIKO is not dogmatic and can discuss this possibility,” he said.
However, Papadopoulos said there was difference in how income from the stocks might be used.
He also said his party disagreed with the gloomy picture being presented of the economy, and with the Finance Minister’s projections that external factors were now limiting its pledge for social benefits.
Opposition DISY deputy Ionas Nicolaou expressed total disagreement with the government’s stance on the gold stocks. He said it would be a sell out.
“The state must find other solutions. It would be better if we examined other measures that would be more efficient rather than selling off assets such as gold,” he said.
European Party deputy Nicos Koutsou also disagreed with the government, calling for a referendum so people could vote on the issue. He said the idea of selling the gold was inconceivable.
“It seems that Mr [Nicos] Katsourides confuses the People’s Republic regime that former Socialist countries had with this Parliamentary Republic,” he said, stressing that deliberations on the issue are inconceivable, since they give the impression to other countries that Cyprus has gone bankrupt and is considering selling its gold.
“Mr Christofias had at his disposal a surplus of millions of pounds, which has disappeared,” he added.
The Green Party also joined the chorus, saying the issues facing the economy needed long-term planning not quick fixes.
But AKEL deputy Stavros Evagoras defended the government, saying that when France and Germany sold of their gold stock at high prices, no one assumed they were on the verge of bankruptcy.
When Cyprus joined the euro zone, the Central Bank said it was not planning to touch the reserves.
The European Central Bank (ECB) is in charge of the conduct of foreign exchange operations and the holding and management of the official foreign reserves of euro zone countries.
All gold and foreign exchange reserves of the national banks remain their assets but, under the Maastricht treaty, are at the disposal of the ECB.
Official euro zone reserves total over €40 billion, of which over 30 per cent are gold reserves of the Bundesbank and around 20 per cent of the Banque de France.
A pact by 15 European nations sets a total limit of 500 tons of gold that can be sold in any one year.
