LISBON(BullionStreet): Can Portugal use it's size-able gold reserves to resolve the still lingering economic crisis?.

Portugal,which has been experiencing an extended downturn is one of the world’s wealthiest when comparing gold reserves.

Whether Portugal should dig into its stock of the precious commodity and ease the plight of its increasingly impoverished society as the crippling side-effects of austerity becoming more apparent by the day.

Portugal's economy hasn't grown in seven quarters and is even expected to shrink by over 3 percent this year. State debt has swelled to around 102 percent of GD.

Analysts said any further delays in resolving the crisis are likely to have increased the amount of asset deleveraging by banks, which may further constrain the supply of bank credit and reinforce financial and economic fragmentation in the euro area.

Portugal is currently sitting on gold reserves worth more than 16 billion euros, which is up 1.4 billion euros on its value at the beginning of the year.

Its gold reserves currently amount to 382.5 tonnes - more than that held by the United Kingdom and almost double the amount held jointly in the vaults of major gold-producing countries South Africa and Australia.

The World Gold Council suggested that the European Parliament pushes for Portugal to be allowed to offer gold as collateral for sovereign debt issuance.

“Portugal has gold reserves in excess of 20 percent of its financing requirements over the next two years”, the World Gold Council said in a report based on research done on its behalf by the London-based group, Europe Economics.

Portugal’s gold is not the collective property of the Eurozone and is the sole beneficiary of the gold held at the Bank of Portugal in Lisbon. But it would still need EU approval to associate its gold with any financial transaction.

According to European Economics report, physical gold bars could be transferred to a third party location.The Portuguese government would get them back when their debts were redeemed and would not get them back if they defaulted.