Proposal on gold reserves rejected in Swiss referendum

Geneva, Dec 1 (IANS) Swiss voters Sunday flatly rejected in a referendum a proposal stipulating the central bank in Switzerland to increase its gold reserves.

The proposal “Save Our Swiss Gold”, launched by several members of the right-wing Swiss People’s Party, required the Swiss National Bank (SNB) to hold at least 20 percent of its currently-over-524-billion-Swiss Franc (over $540 billion) balance sheet in gold, Xinhua reported.

It would also have prohibited SNB from selling any gold and required the 30 percent currently stored in Canada and Britain to be repatriated.

In Sunday’s vote, all of Swiss cantons came against the proposal that required an increased spending on gold.

Meanwhile, statistics from local media Swissinfo showed that the majority of the Swiss voters also said “No” to the move, with some 77 percent having voted against the proposal and about 23 percent in favour. The turnout rate was 49.85 percent.

Latest statistics from SNB showed that the gold it currently holds valued at about 37.5 billion Swiss francs. The more than 1,000 tonnes of gold that the bank now holds account for over 7 percent of its assets.

Moreover, it was reported that the central European country already have the world’s highest amount of bullion per capita.

If the proposal passed, the Swiss central bank would have been forced to face a five-year deadline to buy over 1,500 tonnes of gold worthy of some 70 billion Swiss francs to meet the 20 percent requirement, apart from having to get its gold from abroad within three years.

The uneasy feelings about the more than 100 billion euros (or $124.5 billion) the SNB holds were behind the launching of the gold initiative. The sponsors for the move, who are concerned over massive purchases of euros by SNB, argued that their initiative would strengthen the central bank’s credibility.

But the Swiss government and the central bank did not see eye to eye with them, and called for Swiss people to vote against the initiative.

The head of SNB Thomas Jordan described the initiative as dangerous for forcing Switzerland to restrict its own financial policy and limit its ability to adjust to market changes, having warned that it would have exerted negative consequences for Swiss economy.

Policy makers with SNB warned repeatedly that the measure would have made it harder to keep prices stable and to shield the central bank’s cap on the Swiss franc of 1.20 per euro.

The Swiss central bank defended the minimum exchange rate, which was set three years ago to defend deflation and a recession amid the euro zone’s debt crisis, through massive purchase of euros in an effort to prevent the overvalue of the Swiss franc, and the bank has pledged to buy the foreign currency in unlimited amounts to maintain the cap.

Reports showed that at the end of this year’s third quarter, among the over 460 billion Swiss francs of foreign currency reserves held by SNB, roughly 45 percent were in euros and 29 percent in dollars.

SNB’s policy and moves drew more attention as the market’s anticipation of more European Central Bank (ECB) easing has pushed the Swiss franc to a 26-month high against the euro earlier this month, particularly under the context of ECB poised to stage out more stimulus to boost feeble growth in euro area.

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