Germany’s 1 Trillion-Euro Bet on Italy, Spain via Target2

The European Central Bank has channeled funding equal to about one-third of German GDP into Italy and Spain through the monetary union’s payment-settlement system, Target2. In all likelihood, Germany will get that money back some day, according to Bloomberg Economics. In the meantime, the Bundesbank is exposed to a lot of credit risk that could blow a gigantic hole in its balance sheet if the monetary union were to collapse.