With horror reports about impending ruin of Germany, populists are making a mood against Europe. Everything is half as wild, and no one is keeping a secret. July 9, 2018, 7:23 Uhr668 comments
Perhaps you have not noticed it yet, but Germany is on verge of financial ruin. This is at least impression that is being imposed when debate on so-called target balances of European Central Bank is being pursued se days.
Roughly formulated, argument goes something like this: central banks of crisis countries of sourn Europe would owe Deutsche Bundesbank about 1 trillion euros. The money is lost over short or long term, because se countries are almost insolvent. If expected losses were to be calculated correctly, n Germany would not have a budget surplus but a huge deficit. But established parties kept “truth” secret so that citizens would not go to barricades. And that is why no one in Berlin does anything.
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Almost everything is wrong with this argument.
First, Bundesbank has not lent money to central banks of South. The amounts in question originate from Target 2 payment system. It ensures that euro can be paid anywhere in monetary union. Normally, balances of this system are roughly balanced. The savers bring ir money to bank, which lends.
If many savers now entrust ir money to a bank abroad, European Central Bank will close that gap. The country n has financial liabilities to European Central Bank. The country in which money was brought – and refore does not depend on central bank money – has a claim against ECB.
But: receivables and liabilities are fictitious sizes. They exist virtually, in balance sheets of central banks, not in real world. The fact that money is currently flowing from south to north (and that is compensated by ECB’s corresponding offsetting bookings) is a sign that currency crisis has still not been definitively overcome. But that’s it, too.
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There is only one situation in which balances become relevant: When a eurozone leaves monetary union. This can happen, of course, but n re is a huge chaos in financial markets and in European politics. The target demands are likely to be smallest of all problems.
It is not even clear wher Bundesbank is actually threatening bankruptcy, as is often to be read. After all, a Federal Reserve is not a commercial bank. It prints money itself and can simply ignore hole in balance sheet. So if AfD says that finance minister Olaf Scholz should make provision for possible failures in his budget, n question arises: for what exactly? And at what height?
Second, German target claim is not hidden from anyone. The relevant data is published by Bundesbank on Internet, re are whole books on subject. If policy does not do anything, n because “something” in this case means: restrict free payment transactions in monetary union. And that would almost certainly be end of it. The regional central banks of federal states also help each or in USA.
Then why is matter such a big issue? Because it is no longer about economics, but politics. A large number, a complex matter that almost no one sees through – se are ideal ingredients to make moods with horror stories about Germans as supposed cash cows of Europe and impending State bankruptcy.
In or words, target balances are a tool in attack on basic European policy orientation of Federal Republic of Germany. This misuse of a scientific discourse is real danger, not of trillion that is in any balance sheet.
European Central Bank additional links
Frankfurter Allgemeine Zeitung Unknown role model: Target 2 in America
Neue Zürcher Zeitung Slow farewell to a monetary fiction
Süddeutsche Zeitung Today’s friend, tomorrow’s rival
