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Bailout countries could sell their gold reserves to reduce debt woes

Why should countries subject to EU/IMF financial assistance not be force to sell their gold reserves, German politicians ask. Norbert Barthle, Germany's governing coalition budget speaker, and his counterpart Carsten Schneider from the Social Democrats have urged Portugal to consider selling some of its gold reserves to reduce its debt woes and therefore the bailout costs, Wall Street Journal reports.  Portugal has nearly 383 tons of gold, about 9% of its GDP, which is the highest proportion in Europe. Portugal's holding would be worth $18 billion at current market rates. But Portugal has signed central-bank agreements not to destabilize the gold market, and announcing an imminent dump of their reserves would certainly do that. Some market analysts suggest that the gold of debtor states could be used as collateral in repurchase agreements (We think this is a complicated issue, as any form of collateralised borrowing would subordinate ordinary sovereign bond holders )

Economics is politics by other means
by Carrie (migeru at eurotrib dot com) on Fri May 6th, 2011 at 04:16:15 AM EST
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