BERLIN — Germany’s gold reserves were scattered around the globe after World War II to prevent them from falling into the hands of the Soviet Union. Now much of the treasure trove will come home, the country’s central bank announced Wednesday.
After months of heated debate, stoked by fears about Europe’s economic crisis and criticism that the central bank was not keeping careful enough watch over its gold bars abroad, a top banker said Wednesday that his country would bring home $34.7 billion worth of shiny ingots.
The decision caps a discussion in which top German policymakers questioned whether they could believe the New York Federal Reserve’s promises that it had 122,597 bars of high-quality German bullion in its basement. Some German lawmakers had said they wanted to bring home the entire reserve, arguing that in a time of instability and fears over the future of Europe’s shared euro currency, keeping all the treasure locked up in German vaults would be prudent.
And with the fight over raising the debt ceiling heating up in Washington, more policymakers worldwide are confronting the possibility that the United States could default on its debts. German officials were quick to dismiss any connection with their decision.
Half of the holdings will now be squirreled away in Frankfurt, Germany’s financial capital. The rest will be divided between London and New York. Germany’s gold reserves are the second-largest in the world after those of the United States — but some Germans had started to question whether the metal on the books was actually backed up with the real substance.
“In Germany, a lot of emotion is attached to the topic of gold reserves,” Bundesbank board member Carl-Ludwig Thiele said at a Frankfurt news conference on Wednesday, Bloomberg News reported. “The Bundesbank has managed the gold reserves with great caution and will continue to do so.”
In a nation raised on the “Faust” legend, in which the devil convinces a ruler to abandon gold and print paper money instead, the whereabouts of the country’s gold have special resonance. A report last year from Germany’s chief auditor chided the central bank for failing to keep close enough track of the gold it holds abroad. The confidential report, details of which were quickly leaked to the domestic press, stunned Germans who routinely rate their central bank as one of the country’s most trusted institutions.
The gold trove is a source of pride to many Germans, although it no longer serves a monetary purpose, since the euro is not backed by gold (nor was the deutschmark before it). Proposals in recent years to sell portions of it to fund ambitious social schemes have been quickly dismissed. And the central bank president periodically takes German lawmakers into his own vaults to assure them that the country’s domestic stash is safe and sound.
Thiele said the German central bank planned to leave half of its gold parked abroad so that it would be available as collateral if Germany needed to buy large amounts of foreign cash on short notice — a step it would typically take only if its own currency was in crisis. Then he showed a crowd of reporters some bars of gold, along with the tools used to check their purity.