Italy Moves to Amend Law to Specify People as Owners of Gold Reserves
ECB Opposes, Citing Concerns Over Fiscal Use of Gold
World’s Third Largest Gold Holdings... Significant Impact if Released to Market
The European Central Bank (ECB) has voiced its opposition as Italy moves to amend its laws to specify the people as the owners of its gold reserves. Italy holds the third largest gold reserves in the world, following the United States and Germany. On December 8 (local time), Yonhap News, citing Bloomberg and other sources, reported that "the ECB urged Italy to reconsider the legal amendment that specifies the Bank of Italy's gold reserves belong to the Italian people."
As Italy pushed for a legal amendment specifying the people as the owners of gold, the European Central Bank (ECB) opposed it. Photo by Reuters Yonhap News
Recently, Italy's ruling party has been pushing for a budget law amendment that explicitly states "the gold held by the central bank belongs to the people." The ECB is sensitive to this amendment because it raises concerns that, based on this provision, Italy's gold reserves could be used for fiscal spending.
The gold held by the Bank of Italy amounts to 2,452 tons, valued at 300 billion dollars (approximately 425 trillion won). This is the third largest reserve in the world, following the United States Federal Reserve (8,133 tons) and the Deutsche Bundesbank (3,351 tons). If Italy were to begin releasing its massive gold reserves into the market, it could significantly impact global financial markets, which is why the ECB has intervened.
In Italy, where gold reserves are substantial, there have been ongoing calls to sell gold in order to reduce the national debt, which totals 3.5 trillion euros (about 5,790 trillion won). However, unlike the United Kingdom and Spain, Italy has not sold its gold even during financial crises, demonstrating its resolve by refraining from gold sales even during the 2008 sovereign debt crisis.
Salvatore Rossi, former Deputy Governor of the Bank of Italy, wrote in his book "Oro (Gold)" that "gold is like the family’s silverware or a grandfather’s precious watch," adding, "It is something to be kept as a last resort in any crisis when international confidence in the nation is shaken."
The European Central Bank (ECB) pointed out that "consultations are necessary to protect the independence of the central bank" regarding the budget law amendment proposed by the ruling party in Italy. The Bank of Italy, the central bank located in Milan, Italy. Photo by Reuters Yonhap News
However, with gold prices surging recently, there is growing speculation that this legal amendment may signal a shift in the government's stance. The Bank of Italy's gold reserves must be managed in accordance with European Union (EU) regulations, and under these rules, gold cannot be used as a source of government spending.
The ECB stated, "No explanation or memorandum was attached to the draft amendment regarding the intent of the clause stating that the central bank's gold belongs to the people," and added, "If the Italian authorities believe it is necessary to clarify the legal ownership of the gold reserves, consultations are necessary to protect the independence of the central bank." However, Italian authorities maintain that "this does not undermine EU regulations that protect the independence of the central bank," asserting that there is no issue.
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