By Paul De Grauwe, Professor of international economics, London School of Economics, and former member of the Belgian parliament and Yuemei Ji, Economist, LICOS, University of Leuven
This post was first published at VoxEU
Germany’s large accumulation of TARGET2 claims has created fear that Germany stands to lose vast amounts of wealth if the Eurozone were to break down. After clarifying the issues using basic economic principles, this column shows that Germany could avoid large wealth losses by restricting euro-to-mark conversions to German residents.
The large expansion of TARGET2 claims and liabilities since the start of the sovereign debt crisis has led to fears that countries like Germany would lose vast amounts if the Eurozone broke up (Sinn and Wollmershäuser 2012)1.
This fear cr...
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