Louis, any opinion?
BERLIN -- German Chancellor-designate Angela Merkel's new government may sell some gold reserves and a stake in the state-owned railway to help plug the budget deficit, the country's new finance minister, Peer Steinbrueck, said.
Steinbrueck said Merkel's coalition, which brokered policy accords for the next four years on Nov. 10, aims to cut the deficit while raising investment to help the economy. Proceeds from a partial sale of Deutsche Bahn AG and some of the central bank's gold reserves may be used to set up a 25 billion-euro investment fund, Steinbrueck said.
"There may be scope to sell" central bank gold within an international treaty, Steinbrueck told reporters in Berlin, adding that Bundesbank approval is needed to sell gold. "We would want to uphold both the Bundesbank's independence and the substance of the reserves."
Germany's new coalition is gambling that spending cuts and higher taxes next year, combined with investment, will help bring the budget deficit below a European Union limit by 2007 without choking the economy. The plan by Christian Democrat Merkel, 51, and the Social Democratic Party also rests on economic growth and a record credit line to help pay for investment.
The Bundesbank has so far resisted government calls to use the world's second-largest gold reserves to help plug the deficit. The bank sold less than 7 percent of its allotment in the first year of a European agreement on central bank gold sales.
"It's early days and we have to speak about details," Steinbrueck said today.
Germany has breached an EU rule limiting the deficit to 3 percent of gross domestic product for the past three years. Merkel's coalition has pledged to bring the deficit in line with that limit for the first time in six years in 2007.
The move to run up a new net credit line that will exceed 1996's record 40.1 billion euros is "deliberate," Steinbrueck said. "`We have to let the economy breathe before 2007."
Chancellor Gerhard Schroeder's decision to call early elections on May 23 has led to a six-month suspension of proposals to help the budget, ranging from selling index-linked bonds to introducing real estate investment trusts.
Steinbrueck said he's looking into the possibility of introducing REITs, which allow smaller investors to invest in property by buying shares in the trust, providing he won't lose revenue.
The new coalition plans to channel about a quarter, or 6 billion euros, of its investment fund into research and development, Steinbrueck said. The goal may be reached in part by selling a stake of Europe's biggest rail network.
Merkel plans to sell shares in the railway as early as next year, the Frankfurter Allgemeine Zeitung reported on Nov. 3, citing unnamed lawmakers.
The SPD and the Christian Democratic Union, including its Bavarian affiliate party, the Christian Social Union, are due to vote on combined policy proposals on Nov. 14.
