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Central and Eastern European banks rush to increase gold reserves




Hungary tripled its gold reserves to a total of 95 tonnes, the largest per person in Eastern and Central Europe. Poland added over 200 tonnes of the precious metal to its national reserve over the course of two years, and even the Serbia’s Central Bank has been constantly increasing gold purchases over the past years, writes Cristian Gherasim.

The penchant for gold in Central and Eastern European nations has been on the rise. Hungary’s Central Bank Governor, a close associate of PM Viktor Orban said the move is intendent to stabilize the economy in the context of the COVID pandemic, increasing inflationary risks and inflating public debt. The country’s Central Bank even boasted on its website about having the highest gold reserves per capita in the CEE region.

The Hungarian central bank explained the dramatic purchase of gold bars, highlighting that gold has no credit risk and no counterparty risk, and so reinforces sovereign trust in all economic environments


Another country set on increasing its gold reserves is Poland. Governor Adam Glapinski, also close to the governing party, said that gold should reach 20% of the centrad l bank's reserves during his next term, as he launched his re-election bid.  Glapinski said that the institution he runs will buy at least 100 tonnes of gold in the coming years to demonstrate the country's economic strength.

Poland’s central bank bought 126 tonnes of gold in 2018 and 2019 and repatriated 100 tons from the Bank of England, doubling its reserves.

Repatriating gold reserves has also been used as part of a populist rhetoric, as it happened in 2019 in Romania, when the government in charge then tried unsuccessfully to move the country’s gold reserve from London to Bucharest.

Another gold hoarder, Serbia has also made headlines with its more gradual gold accumulation. "The key driver behind these purchases was to shore up the stability of the Serbian financial system during a time of uncertainty and to guard against the heightened risk of a global crisis," the Foreign Investors Council in Serbia said, adding that the COVID-19 pandemic continues to be an important trigger for wanting more exposure to gold of Central and Eastern European central banks.

Over the past decade some countries in Eastern Europe have increased purchases of gold as a way to reduce reliance on other assets.

On the other hand, other European nations started the millennium by reducing their gold holdings. The Euro Area which also includes the reserves of the European Central Bank sold a total of 1,885.3 tonnes over the past two decades, reducing gold holdings by around 15%. Despite that Germany, Italy, and France still retain some of the largest gold reserves.

The European Central Bank believes that gold remains “an important element of global monetary reserves, as it continues to provide asset diversification benefits”. Its reserves have gradually increased over the past two decades.

Speaking to Cristian Paun, professor at the Bucharest University of Economic Studies and head of the Center for Research in International Economic Relations, gold reserves are intended to offer stability to a country’s currency and support its monetary policy.

Păun told EU Reporter that given the current policies of considerable liquidity poured into the market, gold remains attractive as a reserve asset for central banks to show credibility.

He explained to EU Reporter that some central banks are stockpiling on gold and others are not based on how they regard the role of gold in today’s economy. Another reason that might weigh in heavily deciding for or against gold is linked to the costs associated to the metal’s handling.

“Gold has an international liquidity problem. If you want to get rid of gold quickly, as a central bank, today you have only a few advantageous possibilities. Moreover, gold has its problems of storage, transport, handling and security. There are important costs that cannot be ignored and that not many central banks can afford”, Păun told EU Reporter.

Cristian Păun considers that gold reserves could also have a positive impact in holding off inflation in the EU through a system of pegging money supply to central banks gold reserves.

“Economic differences between euro and non-euro member states could grow due to rising inflation. As long as massive amounts of Euros are printed in the eurozone, non-Eeuro countries could be impacted by this monetary expansion”, he told EU Reporter.

Yet, gold stockpiling could also signal internal political or economic instability, believes Armand Gosu, geopolitics expert on countries from the former soviet sphere of influence. He told EU Reporter that acquiring gold is rather a tendency that can be seen throughout the world in crisis situations.


Hungarian election panel clears questions of LGBT referendum




Demonstrators protest against Hungarian Prime Minister Viktor Orban and the latest anti-LGBTQ law in Budapest, Hungary, June 14, 2021. REUTERS/Marton Monus/File Photo

Hungary's National Election Committee (NEC) has approved the government's list of questions on LGBT issues it wants to put on a referendum as part of what Prime Minister Viktor Orban has called an "ideological war" with the European Union, write Gergely Szakacs and Anita Komuves.

Orban, a nationalist who has been in power since 2010, proposed a referendum on ruling party legislation that limits schools' teaching about homosexuality and transgender issues, stepping up a culture war with the EU. Read more.

An NEC spokesman confirmed that the panel had approved the government's questions.


Facing a tough election next year, Orban has increasingly sought to promote social policies that he says safeguard traditional Christian values against Western liberalism.

The European Commission has launched legal action against Orban's government over the new law, which came into force this month, saying it is discriminatory and contravenes European values of tolerance and individual freedom.

Orban aims to hold the referendum by early 2022 before a parliamentary election, where six opposition parties will unite against him for the first time.

Another set of referendum questions on key government policies submitted by Budapest Mayor Gergely Karacsony, who is vying with other opposition candidates to become Orban's challenger next year, was not on the NEC's Friday (30 July) agenda.

Hungarians will be asked whether they support the holding of sexual orientation workshops in schools without parents' consent, and whether they believe gender reassignment procedures should be promoted among children.

They will also be asked whether content that could affect sexual orientation should be shown to children without any restrictions, and whether gender reassignment procedures should be made available to children.

The amendments, which have caused anxiety in the LGBT community, ban the use of materials seen as promoting homosexuality and gender change at schools, ostensibly as a measure to prevent child abuse.

Several civil rights groups have criticised Orban's reforms and a global survey last month by the Ipsos polling organisation found that 46% of Hungarians support same-sex marriage.

Orban owes some of his electoral success to a tough line on immigration. As that issue has receded from the political agenda, his focus has shifted to gender and sexuality issues.

A June survey by the think tank Zavecz Research put public support for Orban's ruling Fidesz party at 37% of all voters, while the joint opposition party list had 39% support. Another June poll by Median put support for Fidesz at 39% compared with 33% for the opposition parties.

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Hungary to hold referendum on LGBT issues by early 2022




Demonstrators attend a protest against a law that bans LGBTQ content in schools and media at the Presidential Palace in Budapest, Hungary, June 16, 2021. REUTERS/Bernadett Szabo/File Photo

Hungary plans to hold a referendum on legislation that limits schools' teaching about homosexuality and transgender issues late this year or early next year, Prime Minister Viktor Orban's chief of staff has said, write Gergely Szakacs and Anita Komuves in Budapest and Gabriela Baczynska in Brussels.

Orban announced the referendum on Wednesday (21 July), stepping up a culture war with the European Union. Read more.

The European Commission last week began legal action over the measures, which have been included in amendments to education and child protection laws. If successful, Brussels could hold up funding for Hungary while the restrictions are maintained.


"For Hungary, there are many more arguments in favour of European Union membership than against it. Joining the EU was the right decision, it was in our national interest and it remains to be the case," Gergely Gulyas, Orban's chief of staff, told a weekly news briefing.

But he said Hungary believed it had the right to comment on what he called "the rules of the club" and make decisions on its own on issues where it had not handed over authority to EU institutions.

Asked about the referendum, the EU Commission said it does not interfere with member states' chosen methods of policymaking, although it considered the Hungarian law discriminatory.

The measures, which have caused anxiety in the LGBT community, ban the use of materials seen as promoting homosexuality and gender change at schools, ostensibly as a measure to prevent child abuse.

Several civil rights groups have criticised Orban's reforms and a global survey last month by the Ipsos polling organisation found that 46% of Hungarians support same-sex marriage.

Gulyas said Hungary was still in talks with the Commission on its national pandemic recovery plan. But he added that the government would start pre-financing projects from the national budget.

The European Commission listed serious concerns about the rule of law in Poland and Hungary in a report on Tuesday that could help decide whether they receive billions of euro in EU funds to help recover from the pandemic. Read more.

Orban, who has been in power since 2010 and faces an election next April, portrays himself as a defender of traditional Christian values against Western liberalism.

He owes some of his electoral success to a hard line against immigration, but as that subject has ceased to dominate the agenda, he has nailed his colours to issues of gender and sexuality.

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European Commission

EU lists rule of law concerns for Hungary, Poland, pivotal in releasing COVID funds



The European Commission has listed serious concerns about the rule of law in Poland and Hungary in a report that could help decide whether they receive billions of euro in EU funds to help recover from the coronavirus pandemic, writes Jan Strupczewski.

The European Union's executive arm also gave Poland until Aug. 16 to comply with a ruling by the top EU court last week, ignored by Warsaw, that Poland's system for disciplining judges broke EU law and should be suspended. Read more.

If Poland does not comply, the commission would ask the EU court to impose financial sanctions on Warsaw, commission Vice President Vera Jourova told a news conference.


The commission had already raised many of the concerns in a report last year but they may now have real consequences as Brussels has made access to its recovery fund of grants and loans worth a total 800 billion euros conditional on observing the rule of law.

The commission said Poland and Hungary were undermining media pluralism and court independence. They are the only two countries in the 27-member bloc under formal EU investigation for jeopardising the rule of law.

"The Commission may take into account the Rule of Law report ... when identifying and assessing breaches of the principles of the rule of law that affect the financial interests of the Union," the commission said in a statement.

Polish government spokesman Piotr Muller said on Twitter the government would analyse documents from the commission regarding the need for compliance with EU court rulings.

Hungarian Justice Minister Judit Varga said on Facebook the commission was blackmailing Hungary because of a child protection law which won't allow "LGBTQ-activists and any sexual propaganda into Hungarian kindergartens and schools".

The EU executive has already delayed its approval on 7.2 billion euros for Hungary in an attempt to win rule of law concessions from Prime Minister Viktor Orban's government and has not yet given the go-ahead for 23 billion euros in grants and 34 billion in cheap loans for Poland.

Jourova said she could not predict when money for Poland could be approved and noted Warsaw had first to convince the commission that it had a credible system of control and audit for spending EU money.

The report said Hungary had not followed the commission's request to strengthen judicial independence and that its anti-corruption strategy was too limited in scope.

In a decade in power, Orban has partly used billions of euros of state and EU funds to build a loyal business elite which includes some family members and close friends.

The commission cited persistent shortcomings in Hungarian political party financing and risks of clientelism and nepotism in high-level public administration.

Significant amounts of state advertising go to media supporting the government, while independent outlets and journalists face obstruction and intimidation, it said.

The report also expressed concern over the influence of Poland's nationalist ruling Law and Justice party (PiS) over the justice system.

It listed what it said were illegally made appointments and changes by PiS to the constitutional tribunal and other bodies, and Warsaw's rejection of EU court rulings binding for every member state.

The commission noted that the prosecutor general, responsible for tracking down state corruption, was at the same time Poland's justice minister and an active PiS politician.

Since last year, the professional environment for journalists in Poland has deteriorated because of "intimidating judicial proceedings, growing failure to protect journalists and violent actions during protests, including from police forces", it said.

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