03/06/2012 Spiegel online
The Hundred-Billion-Euro Bomb
Euro-Zone Central Bank System Massively Imbalanced
After weeks of detective work, Sinn assembled enough pieces to create a picture that would make any one shudder: Since the 2007 financial crisis, immense imbalances have formed within the otherwise harmless payment system that exists between the central banks of the 17 euro-zone member states. While Italy, Spain, Ireland, Portugal and Greece, all hit hard by the debt crisis, show deficits totaling over €600 billion, the claims owed the Bundesbank have climbed to €498 billion.
'Caught in a Trap'
As long as the monetary union continues to exist, this isn't a catastrophe. The money is virtual, created by central banks, and its existence doesn't mean that an equivalent amount is lacking elsewhere. But as soon as a country leaves the euro zone, or the currency union collapses entirely, things get critical.
"We're caught in a trap," Sinn says. "If the euro breaks apart, we're left with an outstanding balance of nearly €500 billion, owed by a system that no longer exists." That figure, €500 billion, is more than one and a half times Germany's annual federal budget.
This, though, is the worst-case scenario, and would only apply if the euro zone falls apart entirely. A far more realistic possibility is that one country, such as Greece, would leave the monetary union. In this case, all of the other euro-zone central banks would have to bear the Greek central bank's debt together. Germany's Bundesbank, in accordance with its share of the European Central Bank (ECB), would assume about 28 percent. With Greek debt at €108 billion, Germany's share would be approximately €30 billion.