Germany’s economy has been rocked from all sides in the last couple of years, challenging the fundamental viability of its economic model.
Russia’s invasion of Ukraine three years ago continues to place pressure on energy prices while fresh competition from China, in addition to falling demand in its key export markets, including China, has added pressure on manufacturers.
Fresh tariff threats from the Donald Trump administration have created the latest risk for Germany’s export-heavy economy.
German GDP contracted by 0.2% last year, adding to a 0.3% decline in 2023. Several economists expect a third straight year of contraction this year, with state-owned bank KfW forecasting a 0.2% decline this year.
Amid that gloomy backdrop, the Bundesbank added to Germany’s woes by announcing it had swung to a sizeable €19.2 billion ($20.1 billion) accumulated loss last year, its first since 1979.
The bulk of the fall came from a €13.1 billion negative balance to net interest income, a result of lower interest rates on its bond balance compared to rising market rates. While reassuring the public that the Bundesbank’s balance sheet was in a healthy state, Nagel couldn’t say the same about Germany’s economy.
Nagel said there were clear structural problems in Germany’s economy, adding policymakers needed to address its new vulnerability as an export-oriented country and do better to prepare for the green transition and demographic change.
Yesterday, February 26, the Bundesbank in Germany, their Central Bank, announced they had lost about $20 Billion from Interest payouts they had to make while not receiving money back from Bonds they'd invested in. Today, the European Central Bank announced they have "communications glitches" in their $1.9 TRILLION per day system.
Germany’s central bank plunged to a record €19.2bn (£15.9bn) loss last year in the latest setback for Europe’s largest economy.
A bond-buying spree prompted the Bundesbank to report its largest net loss in history, with officials warning that financial strain would remain throughout 2025.
Sabine Mauderer, the Bundesbank’s first deputy governor, said: “Overall, we expect to report losses and carry them forward for some time.”
Here we are, two days later, and all of a sudden, the European Central Bank can't "settle" continent-wide:
The European Central Bank reported a "communications glitch" on Thursday in its securities settlement system, which handles $1.9 trillion a day in transactions, leaving traders and bank risk managers scrambling to figure out the potential impact.
The ECB said the outage had affected communication channels across its pan-European TARGET 2 Securities, or T2S, platform, but did not offer more specifics. Trading sources said communications had been disrupted and the status of trades since the outage was reported remained unclear.
According to the ECB's website, any issues with the T2S system in the past couple of years have typically been resolved relatively quickly. Thursday's outage was reported at 0730 GMT and was still continuing by 1350 GMT.
The T2S platform is used to reconcile and settle trades in cash and securities across the Eurosystem, which includes the ECB and central banks of the countries that use the euro.
Here's the "rub:" As reported above, Settlement (payment) on trades in the European Central Bank take two working days, which might mean disruption may not show up continent-wide until early next week.
So here we are, on a Thursday with a "glitch" in the European settlement (payment) system. Friday is one working day . . . . then there's a weekend . . . and Monday will be the second working day . . . . if the banks open.
Is today's "glitch" an actual "communications glitch", or do the banks not have the money?
Reading this article my memory drifts back to 1931 - Europe's bank disaster triggered by failure of Austria's Creditanstalt. In its wake, increased support of the Nazi party, destabilization of global finance and an acceleration of the Great Depression.
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