GERMANY'S opposition parties demanded the resignation of the Finance Minister, Mr Theo Waigel, yesterday following the Bundesbank's rejection of his plan to qualify for entry into Economic and Monetary Union (EMU) by revaluing the country's gold reserves.
The Social Democrats' finance spokeswoman, Ms Ingrid Mattaeus-Maier, accused the government of endangering Germany's international reputation for economic stability by resorting to increasingly desperate measures to reduce the budget deficit.
"This grab for the gold reserves, which is like a hold-up, also damages confidence in EMU. Citizens get the feeling that the single currency is only possible by means of such a coup and that has an effect on confidence in its international solidity. Because, if the Germans start resorting to such accounting tricks, we cannot be surprised if other countries do so too," she said.
The Frankfurt-based central bank issued a statement on Wednesday night sharply rejecting Mr Waigel's plan to change the Bundesbank law and transfer part of the profit from revaluing the gold to Bonn this year. This would help Germany to keep its 1997 deficit below the target of 3 per cent of gross domestic product (GDP) laid down in the Maastricht Treaty.
The Chancellor, Dr Helmut Kohl, insisted that the government would go ahead with the gold plan regardless of the Bundesbank's opposition and Mr Waigel yesterday brushed aside speculation that his job was at risk.
"I read that in the newspapers every Sunday. I hear it every morning on the news. It's been going on for eight years now but I'm still in office," he said.
But Mr Ernst Welteke, a member of the Bundeshank Council, warned Mr Waigel and Dr Kohl that EMU remained unpopular and that most Germans would back the Bundesbank in any conflict with Bonn.
"Politicians do not have much credit with the public at the moment. Popular trust that the transition period from the DM to the euro will be stabilily-orientated lies more with the Bundesbank than with politicians," he said.
Bonn rejects the Bundesbank accusation that the gold revaluation is an infringement of the central bank's independence, which is viewed as a cornerstone of Germany's post-war economic success. Germany currently values its 95 million ounces of gold at well below the market rate and the reserves were due to be revalued by the new European Central Bank (ECB) in 1999.
But the Bundesbank argues that the plan to use profits from the revaluation to meet the Maastricht criteria is against the rules of the ECB. More importantly, the bank fears that the ploy will undermine the stability of the euro and make it impossible for Bonn to preach credibly to its European neighbours on the virtues of good economic house-keeping.
Yesterday was a public holiday in much of Germany, so the Frankfurt stock exchange was closed and a number of influential newspapers did not appear. But the country's biggest-selling newspaper, Bild, predicted that the row over Mr Waigel's gold plan is far from over.
"The government and the Bundesbank are on a confrontation course with an uncertain outcome. But one thing is sure there will be more than one bloody nose in this fight. Bonn's obnoxious and loud insistence about the need for discipline will now come back to haunt it. It will be a painful awakening," it wrote.
The government's increasingly desperate measures testify to Dr Kohl's determination that EMU should be launched as planned on January 1st, 1999, even if the entry criteria have to be fudged. German officials say that expressing doubts about the EMU start date has become a taboo within the government and that Dr Kohl has hypnotised his embattled cabinet into believing that the single currency is the answer to its political troubles.
But Mr Waigel's gold plan has unleashed such public condemnation that it may have the opposite effect to the one he intended, strengthening the hand of those who argue that EMU should be postponed until economic conditions improve.
