Peter Boehringer
Target Requirements
German Bundestag, April 11, 2019,
Plenarprotokoll 19/95, pp. 11340-11341
[Peter Boehringer is an
Alternative für Deutschland Bundestag member from the southern German state of
Bavaria. He is a businessman, investor and author and is currently chairman of
the Bundestag budget committee. He here presents an AfD motion calling for the
federal government to enter into negotiations with European Central Bank (EZB)
concerning the Target system, the major element of the euro rescue regime.]
Herr President. Honorable colleagues.
Target 2 is an extension of credit by the
Bundesbank – without terms of maturity, without amortization obligation, without
maximum limit, without payment of interest. It consists of unsecured, unmanageable
and unaccountably worthless obligations of a sum nearly three times the yearly
federal budget. The Target system is in fact the largest, single vehicle of the
euro rescue.
The Bundesbank nevertheless continues to deny
the risk factor of this position. The Eurozone is in fact regarded as unalterable,
ja, as immortal, even though its
general framework is creaking. Yesterday the Italians significantly increased
their deficit forecast. UBS and Handelsblatt
have this week even discussed an Italo-exit.
Until 2007, cross-border payments for decades
were made entirely without Target balances by the private inter-bank market.
And before Target 2, there was a flourishing world commerce. And, yes, we here
have long since been exporting. Why then a further Target debate? There are
four, equally good reasons for that.
First, it is now apparent the Bundesbank’s
2018 expectation, that with the end of the EZB’s bond purchases the Target
balance would no longer increase, was unfortunately false. It is not so. There
was a one-time, technical balance decrease in January of this year. The
present March balance is approximately 70 billion euros greater than in
February; at 941 billion euros, now again at an almost all-time high.
The federal government hoped seven years
earlier for an improvement of Target 2. State Secretary Koschyk said here in
2012:
The federal
government is proceeding on the basis that…Target balances…in the mid-term
again decrease.
Since then, they have increased by hundreds
of billions of euros. A trillion is now in sight. The long-term origins of the
Target balances, trade imbalances due to the euro’s exchange corset and capital
flight from the southern European countries, are actually unaltered. Nothing
has changed.
Second reason. The alteration of the EZB’s
statutes for a new regulation of its payments system announced in the fall of
2018 is not yet complete. There thus exists a good opportunity for this house
and for the federal government to participate in the new regulation which we
should finally grasp.
The third reason. It has lent itself to a
little progress: It would for all that advertise a hearing – as we saw once –
on the theme in the committees. Our motion presented today is a contribution to
that.
The fourth reason. In the informed debate as
well as in the federal accounting office and in the accounting audit committee
are now voices recently heard which regard the Target system as a risk to the continuation
of the euro – a viewpoint which we have shared and accepted for years. The
Target requirements are in any case risky and that does mean initially with the
complete collapse of the euro system.
With an Italo-exit there exists a high risk
of the assets of the Banca Italia and the Italian commercial banks becoming
distressed due to increasing interest at exactly the same time the 490 billion
euros of the Italian Target obligations become interest-bearing. Italy must
then in a moreover critical situation make very high Target interest payments. For
the EZB the result would be initially to the detriment of many billions, and thus
for the Bundesbank on account of its participation…in case of a euro exit it is
fully clear that the Target obligations owed to the Bundesbank by Italy and
Spain as the largest indirect debtor states will never be able to be paid back
at value. For the national economy, these obligations are a complete risk.
The federal government in 2012 was more
honest about the risk assessment. Then State Secretary Kampeter said:
Risks as a result
of the Target 2 balances can only be realized with the exit of a country from
the currency union.
Today, however, the risk of loss is denied by
reference to the EZB as counter-party for the Bundesbank, which, ja, can never become insolvent. That is
the story. That is, even for the EZB, irresponsible to the tune of 941 billion
euros. Even a partial write-off of the Target obligations would rapidly consume
the EZB’s own capital. That would also concern the Bundesbank, the EZB’s
companion [Gesellschafterin]. Despite that, the Bundesbank unfortunately is forming no back-up for
a deficiency. In an out year, it could as a consequence pay no profits into the federal household which would correspondingly be charged to the federal budget.
In certain circumstances, the Bundesbank will have to be re-capitlaized with a
three-figure billion euro sum of tax money. The German taxpayer would foot the
bill to rescue the southern European states.
Many are currently saying: The USA also has a
Target system. That is correct. But the EZB in 1999 made a bad copy of the
so-called Fedwire system. The practically unlimited transfer of risk which is
built into the European Target system is not in the Fedwire. The regional banks
of the Fed system each year must cover their deficits with real asset values,
even formally with gold. And so in the U.S. Target system it never comes to
such absurd repudiations as in the EZB Target system.
Target 2 makes up nearly half of the German
net foreign assets of some 2 trillion euros. That is the material savings of
Germans in foreign countries. Almost 50 percent of this pays no interest and is
at risk.
Even gold purchases would therefore be a
better way: For 941 billion euros you receive approximately 25,000 tons of
gold, or almost eight times the official state gold of the Bundesbank.
The Bank for International Settlements has
recently decided in the context of the new Basel III regulations to accept in
the future gold as bank capital. That is new and is an opportunity for the
banks to rebuild their own capital or public assets and similarly reduce the
unspeakably high Target balance. Gold plainly is not a barbaric relic as it is
often described in Keynesian circles.
Unfortunately, the Bundesbank still says:
Target balances are not obligations but irrelevant accounting entries. Yet they
are credit obligations; otherwise, they would not be entered as such on the
active side of the account. The question besides is officially clarified: EZB
chief Draghi has required the Italians to pay back their Target liabilities in
the case of an exit. That is quite clearly an indication of a credit. Naturally
the Italians could and would not do that: Upon an Italo-exit, to pay at last
its EU dowry of 490 billion euros. Naturally is that absurd. Therefore: To dispose
of Target as a risk-free accounting sum, as the Bundesbank is doing, is a
virtual rejection of standard book-keeping practice and thereby a falsification
of the current economic relations underlying the balances.
Here is an accounting system which changes
Germany into an uncontrollable, suddenly by-the-billions-worth source of credit
for foreigners.
So please take a constructive part in the
committee’s search for a workable solution for the German taxpayer. The AfD
proposes as some options gold purchase and a re-securing of obligations and
thereby implicitly also a renewal of interest payments.
Michael
Grosse-Brömer (CDU/CSU): You do know your way about gold purchases!
There are besides also others: For example, a
Mediterranean fund, supplied by German credit, or a large investment program
for improvements of German schools and streets which must be however performed
by firms from southern European countries. While that would indeed be Keynesian
debt stimulus, it would lead to a good use of the Bundesbank’s otherwise
worthless Target balance. That would perhaps even be something for the
left-wing delegations of this house. So please let us speak of this in
committee and perhaps during the hearing.
Thank you.
[Translated by Todd Martin]
