By Peter Nielsen ZURICH, May 11 (Reuter) - Fearing Swiss voters will reject the use of central bank gold to finance a seven billion Swiss franc humanitarian foundation, a member of the cabinet is looking at alternative ways to raise the money.
Swiss president Arnold Koller surprised the country in March by announcing a Swiss Foundation for Solidarity that was aimed at aiding foreign and domestic victims of the Holocaust and other human rights abuses.
The plan to use central bank gold must still win legislative approval and faces a referendum likely to be held in 1998.
Defence minister Adolf Ogi is breaking ranks with his cabinet colleagues and has asked members of his staff to find ways to finance the foundation that will meet popular approval, the Swiss Sunday newspaper Sonntags Zeitung said.
Ogi is not only reacting to popular criticism of the foundation's financing scheme, but also critical voices from other leading politicians and business people, the paper said.
Vreni Spoerry, an influential member of parliament, last month proposed paying for the foundation through improved management of the Swiss National Bank's <SNBZn.S> (SNB) currency reserves instead of a sale of some of its gold.
Better management of SNB's assets would result in additional revenue of 400 million francs, more than enough to finance the foundation, Spoerry wrote in the influential Neue Zuercher Zeitung (NZZ) newspaper.
The original plan, the brain child of SNB Chairman Hans Meyer, calls for the SNB to revalue its 2,600 tonnes of gold reserves at around 60 percent of market prices rather than the current fixed legal parity of 4,595 francs per kilo.
This would raise 14 billion Swiss francs and the SNB would transfer seven billion francs to the foundation.
The foundation would sell this gold over a period of some 10 years to raise money and invest proceeds in interest-bearing assets. This would give some 350 million francs in annual proceeds to finance the foundation's humanitarian activities.
Announcement of the plan was widely hailed as an astute political move that would deflect much of the international criticism of Switzerland's role during World War Two.
However, many Swiss also criticised the government for buckling under international pressure, arguing the idea behind the foundation is correct, but it should not have been proposed in response to pressure.
Others, such as populist politician Christoph Blocher, from the same political party as cabinet-member Ogi, have also criticised the idea behind the foundation and said it implies guilt when the Swiss have nothing to be guilty about.
Blocher, a key opponent of Swiss membership of the European Union (EU), and others have argued that selling the SNB's gold is equal to giving away the family silver at a time that Switzerland is facing unemployment and economic hardship.
In addition to a revaluation of the central bank's gold reserves, the government is also planning to revise the SNB's charter to give it greater freedom to manage its assets.
The reform bill would also reduce the SNB's gold reserve requirement and allow it to carry out gold lending.
The proposal for a partial revision of the national bank law estimates the SNB's annual income could be increased by 400 million francs annually.
Like most central banks, the SNB has a certain amount of gold in its vaults to back its currency. However, since the gold standard was scrapped in 1971, the SNB's gold reserves have not been used and are steady at around 2,600 tonnes.
Zurich Editorial +41 1 631 7340
07:53 05-11-97
Market Data 
Markets 
AI
