Crisis-Hit Italy Hits Crisis Over Anti-Crisis Gold Tax
Adrian Ash, July 22nd, 2009
Page 1
Adrian Ash - BullionVault
If this sounds like a rough and clumsy translation of Italy's proposed gold tax, you should see the original...
THERE'S ONLY so many ways you can say "No" in Italian (just the one in fact), and the Bank of Italy has used them all in defending its gold hoard from Rome's over-spent politicians in the last 10 years.
"We always knew they didn't get on," as Stefano Sansonetti wrote at Italia Oggi back in late June. In fact, finance minister Giuli Tremonti and Banca d'Italia governor Mario Draghi make the UK's Alistair Darling and Mervyn King look like the best of pals. (Though they might seem more chummy than ex-US chief Hank Paulson and Fed chair Ben Bernanke before too long...)
"Nor is it news," Sansonetti went on, "that the finance ministry has had its eye on the Banca d'Italia's gold for some time. There have been plenty of attempts to make use of these resources."
But now "It really looks like Tremonti is playing games with Draghi" - a game costing €251 million...or perhaps €206m...if not €300m, the latest proposal issued on Monday by the Italian government.
Either way, this game aims to force the Bank to break its gold-hoarding habit of a decade and more. And since Draghi is widely seen as the next president of the European Central Bank (ECB) - and with the current Central Bank Gold Agreement to cap sales at 500 tonnes per year less than 10 weeks away from expiring with no new deal in place - what happens in Rome might just matter to gold investors.
Given the state of Italy's public finances, it might matter to anyone holding Euros, too. But first, the story so far...
On June 29th the Treasury on Via XX Settembre tried to throw a net around the Gold Bullion stored beneath Rome's Palazzo Koch. It stands at 2,451.8 tonnes - the third largest central bank hoard in the world. And there it's stood - unchanged at 2,451.8 tonnes - for the last 11 years or more.
That makes Italy the only Eurozone nation not to sell any of its gold reserves since 1998. It's also the only signatory to the Central Bank Gold Agreements of 1999 and 2004 not to sell any gold either. Which makes you wonder why it bothered to take out its pen.
Despite agreeing to the CBGA's 400-tonne per year limit in 1999 and then signing the renewal - with its new 500-tonne ceiling - five years later, the Banca d'Italia failed to sell one single gram, let alone an ounce or a tonne. Not at any price. Not at €250 an ounce a decade ago. Not at €500 an ounce in spring 2006. Not at €750 an ounce in Feb. 2009.
