Aufsätze Ökonomik

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Prof. Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.

Abhandlungen über Johann Heinrich Jung-Stilling

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Balance sheet clean-up, balance sheet adjustment

Euphemistic expression (euphemism: a harmless word substituted for one considered unfavorable) that emerged in the course of the 2008 financial crisis to describe the sometimes very high loss write-downs that banks have to make on asset items. – At the European level, these items are mainly domestic government bonds, which are primarily reported by institutions on the southern front. Due to an exceptional regulation (exemption clause) in European accounting law in force since 2006, banks do not have to set aside equity as a buffer if they hold European government bonds. In the course of the Greek crisis, however, the only way to save the state from bankruptcy in 2012 was for private creditors, and thus above all the banks, to agree to a partial debt waiver.
This shows a very dangerous assemblage of banking risks and sovereign risks. – It was criticized that the ECB bought government bonds from the banks on the southern front through its monetary policy outright transactions, the so-called OMT program, and that the institutions immediately bought government bonds again with the central bank money thus received; the ECB thus indirectly financed government budgets – which it is expressly prohibited from doing under the EU Treaty. The bailout takes the pressure off all participants to adjust their expenditures to their revenues and to regain lost competitiveness. Roughly speaking, all EMU members must finance the debts of deficit sinners (budget offenders) based on the Governing Council’s decision. This is an outright violation of the EU Treaty. Article 125 TFEU explicitly states that the Community shall not be liable for the debts of any public entity in the member states. – See investment liability presumption, central banking, bailouts, central banking, bailout, banking supervision, European, balance sheet adjustment, blood toll, deficit financing ban, democracy deficit, diet yield, European Monetary Union, fundamental error, ECB collateral, ECB fall from grace, financial market stabilization agency, moral hazard, paper, toxic, policy default, risk premium, factual design, shadow state, debt drug, sovereign debt repatriation, transfer, disguised, redistribution, central bank-induced, zombie bank. – Cf. Financial Stability Report 2012, p. 27 ff. (necessary balance sheet adjustments in EMU), ECB Annual Report 2012, p. 89 (on the ECB’s purchase program), ECB Monthly Bulletin of May 2014, p. 87 ff. (effects of the ECB’s purchase programs; overviews; references).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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