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Bundesbank

denies Euro-currency

gold backing plan

BONN: The German Bundesbank and finance ministry on Thursday denied a newspaper report that they were working on a plan to use gold to back a future single European currency.

Thursday's daily Die Welt said in an unsourced report that the two bodies were considering covering 25 percent of the new currency's volume with gold, a measure which might counter fears that the EU currency could be weaker than the stable mark.

"We know of no such plans, they don't come from here and we don't consider them economically revelant," a Bundesbank spokesman said.

A finance ministry spokesman added "We know nothing of any such plan, and furthermore the Deutschemark is an excellent example of how stable a currency can be without gold backing."

Die Welt said there was no suggestion of putting a future Euro-currency on a gold standard. But it said the backing of a fixed quantity of gold would provide a guarantee against expansion of the money supply.

Germany and Germans are particularly sensitive about any prospect of losing some of the mark's hard-won stability for a weaker Euro-currency because of their painful experiences with hyperinflation in the early part of the century.

The European Union plans to introduce a common currency by 1999 for members who fulfil a set of strict economic and budgetary criteria.

Die Welt said the Bundesbank's current gold stocks would, if valued at around market prices, easily be enough to back a quarter of its current banknote volume of 226 billion marks ($153 billion). It said France and Italy were in a similarly comfortable position.-Reuter