A golden opportunist

Date: 22/05/1997

MANY column inches have been written over the past week about the German government's 'shocking' plans to revalue the country's gold and foreign currency reserves.

All of them harp on about German hypocrisy, cheating and book-cooking. Yet Finance Minister Theo Waigel's well-kept secret plan - so well-kept that nobody even misreported it in advance - tells us nothing about any of these supposed facets of the Teutonic personality.

These value judgements as often as not come from the same people who take their common sense economics lessons from the bond markets while, five minutes later, laying into their governments for hiking taxes or cutting social welfare programmes.

No, Waigel's ruse to revalue long-undervalued gold reserves and transfer - as is normal practice - some of the Bundesbank's surplus into the government's account tells us something else: just how arbitrary the Maastricht Treaty's budget-cutting targets always were and how fetishist most people have become about them.

The capital gain from the revaluation of the gold will be used not to reduce the size of the budget deficit but to offset the stock of public sector debt run up since German reunification. Admittedly, it is not exactly what was meant by 'sustainable convergence', but neither is it grand larceny.

We hear that Italian politicians have been laughing at the irony of German monetary fiddling only weeks after their immense efforts were snubbed by the European Commission's forecasting unit.

They are missing the point. Rome's 1997 budget plans were jam-packed with deferred tax problems and the front-loading of revenues which were stoking up problems for the near future. The same cannot be said of Waigel's trickery.

In fact, the best theory doing the rounds regarding the gold plan is that Waigel is using it to achieve long-term goals. By threatening to sell off the family silver, he may finally be able to knock enough German parliamentary heads together to push through the kind of fundamental tax reform which has eluded Bonn for months.

Through opportunistic sleight of hand, Waigel might just begin the dismantling of his country's anti-jobs fiscal system.