What is taking place between the European Central Bank and Giorgia Meloni’s government is becoming a long-distance tug of war. At the center of the dispute is FdI’s amendment to the maneuver on the Bank of Italy’s gold reserves. The “changes made” in a new wording are not enough: “It is not yet clear what the concrete purpose of the proposed revised provision is”, Eurotower reiterates. Hence Giorgia Meloni’s message to the government: “Reconsider the proposal”. The reply comes from the Minister of Economy, Giancarlo Giorgetti, who – it is stated – will provide “all the necessary clarifications”.
Bank of Italy’s gold becomes a case
The first version of the amendment to the budget, signed by Malan (FdI), established that the ownership of the Bank of Italy’s gold belonged to the State. After the first “no” from the ECB, it was eliminated. According to the new version “the gold reserves managed and held by the Bank of Italy belong to the Italian People”.
The European Central Bank did not like the latest reformulation either because “it is not accompanied by any explanatory report which illustrates its rationale”. Frankfurt recognizes “some innovations that meet the previous observations”, in particular “the respect of the articles of the treaty on the management of countries’ gold reserves, but doubts remain about the purpose of the rule. “Despite the changes made”, “it is not yet clear what the concrete purpose is”, explains the Eurotower. “For this reason, and in the absence of explanations”, the Italian authorities are “invited to reconsider the proposal”, also in order to “preserve the independent exercise of the fundamental tasks” of the Bank of Italy.
The task of managing the situation is entrusted to the Minister of Economy, Giancarlo Giorgetti. The owner of the Mef would be ready to “provide the ECB with all the necessary clarifications”.
How much gold does the Bank of Italy have and why
Gold reserves are an integral part of the country’s official reserves and have the function of “strengthening confidence in the stability of the Italian financial system and in the single currency”. The Bank of Italy is the fourth largest holder of gold reserves in the world, after the US Federal Reserve, the German Bundesbank and the International Monetary Fund. The total quantity of gold owned by the Via Nazionale Institute is equal to 2,452 tonnes, consisting mainly of ingots (95,493) and a smaller part of coins. The updated value of gold is published annually in the Balance Sheet of the Bank of Italy.
Over the years, the ECB has repeatedly clarified that the issue of the legal ownership (holding and management) of gold reserves “ultimately concerns the competences of the European System of Central Banks (ESCB) pursuant to the Treaty” on the functioning of the European Union. The treaty in question also guarantees the independence of the central banks, including Bank of Italy “in the performance of their tasks”.
The Bank of Italy itself explains that in the event of currency crises, “a central bank can dispose of gold, like foreign currency reserves, to preserve confidence in the national currency by using it as collateral to obtain loans or, ultimately, selling it on the market to purchase the national currency so as to support its value”. Gold is also a good hedge against inflation, as it tends to maintain its value over time. Furthermore, unlike fiat currencies, gold is not an asset “issued” by a government or central bank and therefore its value is not affected by the solvency of the issuer.
