Parliament debates what to do with excess gold

Parliament is debating what to do with the proceeds from the sale of excess gold reserves Keystone

Parliamentarians are making a new attempt to decide how to spend the proceeds from the sale of the Swiss National Bank’s excess gold reserves.

This content was published on June 8, 2004

Previous plans, including a proposal to spend the proceeds on humanitarian projects, were rejected by Swiss voters.

If the government gets its way, the money from the sale of 1,300 tons of excess gold will be kept in a special fund and lead to annual interest payments of SFr450 million ($364 million).

The latest proposals include plans to use part of the proceeds to support the country’s social security and education systems.

Stéphane Garelli, a professor at the International Institute for Management Development (IMD) in Lausanne, says it would make sense to invest the money in something productive for the future of the country.

“But I understand that we also have to solve the problem of shoring up the finances of the old-age pension scheme,” Garelli told swissinfo.

Ongoing debate

Discussions about what to do with the proceeds from the sale of the excess gold have been going on for several years.

In the late 1990s the Swiss National Bank (SNB) came under pressure as the public sector began looking for ways to reduce spiralling debt.

The SNB began putting its excess gold reserves on the market in May 2000 with the aim of investing the proceeds in the public sector.

Three years earlier the government had suggested that a third of the excess gold could be used to set up a special charitable fund.

But in a nationwide vote in 2002 the electorate rejected the proposal for a so-called Solidarity Foundation as well as an alternative plan by the rightwing Swiss People’s Party to spend all the money on the old-age pension scheme.

Daily sales

More than 1,000 tons of gold have so far been sold, according to National Bank spokesman Roland Baumann.

He estimates that only 130 tons of the excess reserves will still be in the bank’s vaults at the end of the year.

Garelli says moves are being made in other countries, including in neighbouring France, to follow Switzerland’s example.

“Many governments have discovered that the central banking system has accumulated a lot of [gold] reserves which are actually not needed any more in the modern monetary system,” he said.

The centre-left Social Democrats and the People’s Party have joined forces for the latest debate in parliament about how to distribute the money.

They suggest that over the next 30 years two-thirds of the money should be set aside for the pension scheme, with the remainder being placed at the disposal of Switzerland’s 26 cantons.

Cabinet plan

This proposal goes against a plan put forward by the cabinet with the backing of the two centre-right parties, the Radicals and the Christian Democrats.

Both parties support the idea that the cantons would receive two-thirds of the money, while the remaining one-third would be given to the federal authorities.

Alternative proposals by the Green Party and other small groups as well as non-governmental organisations suggest using the funds to finance education projects.

In a separate debate, parliament is also due to consider plans by the Social Democrats to make the old-age pension scheme the main beneficiary of the SNB's annual surplus, which last year stood at about SFr3 billion.

Under the current system, the cantons receive two-thirds, while one-third is earmarked for the federal government.

swissinfo, Urs Geiser

In brief

Parliament has resumed a debate on the use of excess gold reserves, nearly two years after voters turned down proposals to spend the money on humanitarian projects and the old-age pension scheme.

The House of Representatives approved a proposal by the Centre-left and the Right to set aside part of the money for the pension scheme and leaving a third to the cantons.

The cabinet and the Centre-right wanted the cantons to be the main beneficiaries, while the rest would go to the federal authorities.

The House also came out in favour of dividing the annual surplus of the National Bank equally between the old-age pension scheme and the cantons.

The Senate has still to discuss both issues before voters have the final say.

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Key facts

The National Bank began to sell off half of its gold reserves - some 1,300 tons - in May 2000.
More than 1,000 tons have so far been sold and by the end of this year all but 130 tons will have been put on the market.
Under a proposal the proceeds will go into a special SFr20 billion ($16.1 billion) fund, with annual interest payments of about SFr450 million over a period of 30 years.

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In compliance with the JTI standards

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