Germany will not allow gold reserves held by its central bank, the Bundesbank, to be used to bolster the rescue fund for indebted eurozone countries, Economy Minister Philipp Rösler said on Monday.

"German gold reserves must remain untouchable," Rösler said in an interview with ARD public television Monday morning, rejecting a proposal reportedly put forward by France, Britain and the United States at last week's G20 meeting in Cannes.

Rösler's comments echoed a statement made Sunday by government spokesman Steffen Seibert, when he dismissed two German newspaper reports that said some G20 leaders wanted the Bundesbank to sell about 15 billion euros ($20.6 billion) of its gold reserves, which are worth an estimated total of 139 billion euros.

"Germany's gold and foreign exchange reserves, administered by the Bundesbank, were not at any point up for discussion at the G20 summit in Cannes," Seibert said.

Rösler said the Bundesbank must maintain its gold reserves and independence

Special Drawing Rights

Seibert did, however, confirm that some G20 delegates suggested that the International Monetary Fund (IMF) could issue more Special Drawing Rights (SDR) - an international reserve asset created in 1969 and based on a basket of international currencies - to help increase the firepower of the European Financial Stability Facility (EFSF).

According to the Sunday edition of the Frankfurter Allgemeine Zeitung newspaper, France, Britain and the United States wanted central banks to contribute 50 to 60 billion euros worth of SDRs to strengthen the EFSF.

"Some Cannes participants brought up the issue as to whether SDRs might be used to boost the EFSF's efficiency," Seibert said. "The initiative was rejected by the German side."

The Welt am Sonntag newspaper reported Berlin's rejection was driven by the Bundesbank's view that the creation of additional SDRs could oblige the central bank to cede reserves to the IMF, which would encroach on its prized political independence.

News of the plan received little support from private-sector bankers in Germany.

"We cannot now approach the Bundesbank or other foreign banks, even indirectly. We must find other solutions," Deutsche Bank CEO Josef Ackermann told reporters. "We favor a 'debt insurance' solution that would dramatically raise the value of the rescue fund."

Eurozone finance ministers are scrambling to stabilize the common currency

Nuts and bolts

Eurozone finance ministers are due to meet in Brussels on Monday evening to discuss the mechanics of a plan to accelerate and strengthen the 440-billion-euro EFSF which, under a recent euro summit deal, could be leveraged to one trillion euros to support indebted members.

Expanding the fund's lending capacity is meant to prevent the so-called "debt contagion" spreading from crisis-hit Greece to Italy, whose borrowing costs have hit their highest level compared to German debt since the euro was launched 10 years ago.

Eurozone leaders had hoped a summit held in Brussels last month would convince emerging economies like China, India and Brazil to support the EFSF via a guarantee fund linked to the IMF.

But non-EU members of the G20 appear reluctant to invest directly in the existing EFSF without greater IMF involvement

Author: Sam Edmonds

Editor: Nancy Isenson