Greece’s Gold

August 3, 2012 – German leaders are openly stating that a Greek exit from the Eurozone no longer
troubles them and they are apparently prepared for the eventuality. Political difficulties
within Greece represented by a Parliament lacking agreement augments Greece’s
failing efforts to control its debt and indications the beleaguered nation will need further

As the Troika and Greece’s lenders now admit privately they doubt the country
will be able to meet an official target of bringing debt down to 120 percent of GDP by
2020, calls from more public positions, including the Finance Ministry in Germany, of an
almost certain Greek exit from the Eurozone are making the news.

The 111 tons of gold in possession of the Greek country are held in one of three
central banks but possibly spread throughout the three, including the Bank of England,
the Banque de France, and the US Federal Reserve.

It is possible, though unsubstantiated by the Bank of International Settlements,
that Greece first used its gold two years ago in gold/currency swaps undertaken during
a period when it was extremely difficult for the country to raise new loans at reasonable
interest rates. Creditors required the collateral of the gold/currency swaps in order to
facilitate the new loans at a period when the financial stability of the Greek nation was
seriously in question.

As Greece then required a large bailout from European Union creditors it is
likely that a portion of the collateral, to be forfeited upon default, is the 111 tons of gold
possessed by Greece. With an imminent bond payment of 3.1 billion euro due to central
banks of August 20 and the denial of future bailouts from Germany and Troika members,
Greece now stands to lose the 111 tons of sovereign gold holdings.

Greece’s economy shed 3.5 percent in 2010 and 6.9 percent in 2011 and is
expected to lose 7 percent in the current year, a decline on par with the Great Depression
of the 1930’s. Unemployment in Greece stands nominally at 22.5 percent and is expected
to rise to 30 percent. Meanwhile, Greece’s main retailers association warned Monday that
sales were expected to drop per projections to 53 percent this year, adding to troubles that
would contribute to speculation on a Greek default on its loan terms that would entail the
forfeiture of its gold holdings.

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