Gold and the Eurozone

The eurozone currently has gold reserves of almost 10,000 tonnes, and central banks have benefited greatly from their gold reserves over the past decade.

Selling gold is not an answer to the eurozone's problems, according to the World Gold Council. Firstly, this is not possible under the existing EU Treaties, which stipulate that the central banks of the Member States remain independent of the government and that control is prohibited for the direct financing of the government.
Second, because the provisions of the Central Bank Gold Agreement prohibit the sale of gold from protecting the collective value of the region's reserves.
Finally, the sale of the national gold reserves would simply not be enough to meet the need. The gold reserves of the countries affected by the crisis (Portugal, Spain, Greece, Ireland and Italy) represent only 3.3% of the combined outstanding debt of their central governments.

Nevertheless, gold can make a positive contribution to the euro crisis. This is possible because gold can provide a cheaper form of financing for eurozone member states. At the national level, member states can use gold as collateral to reduce the rate. With the help of gold for the purposes of issuing sovereign debt, greater flexibility could be created. We call this concept gold-backed bonds.

The European Commission itself proposed in a recent Green Paper on stability bonds that gold is an excellent means to use as collateral in, for example, 'Eurobonds'.

Collateral assets must have minimal credit risk. Gold has none, according to World Gold Council. It is nobody's liability and it has negligible inflation and currency risk. Unlike national currencies, the value of gold does not depend on a country's economic policies.

Source: www.gold.org