In an effort to reduce France’s deficit, the French Central Bank is considering selling as much as 600 tonnes of gold reserves, or about 20% of its holdings.
At a gold price of US$400 per oz., the sale would fetch roughly US$7.7 billion.
According to the London-based World Gold Council, France had 3,025 tonnes of gold, which accounted for slightly more than half of reserves.
France, as a member of the European Union, is required to keep its annual deficits below 3% of gross domestic product, but this year’s deficit will exceed that level.
France is not alone. EU members Britain, Greece, Germany, Italy and the Netherlands are running annual deficits in excess of 3% GDP.
Economic growth has been stagnant among EU countries, and politicians and economists alike are looking for ways to stimulate economic activity. Central Bank economists say debt reduction will ultimately do just that.
The Bank of France recently trimmed its forecast for second-quarter growth to 0.5% from 0.6% and said the economy probably would not accelerate in the next three months. France’s economy grew 0.8% in the first quarter.
The announcement of the gold sale comes on the heels of the European Central Bank’s decision to set interest rates at a 6-decade low of 2% to support an economic recovery in the dozen euro nations, even after recent surges in oil prices pushed inflation above the bank’s limit.
Inflation for the dozen countries sharing the euro accelerated to more than a 2-year high of 2.5% in May.
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