The Impact of EU Shadow Liabilities on Member States; Inflation and Currency Effects
The Impact of EU Shadow Liabilities on Member States; Inflation and Currency Effects

Author(s): Gordon Kerr
Subject(s): Politics / Political Sciences, Politics, Economy, Supranational / Global Economy, Business Economy / Management, Governance, Economic policy, EU-Accession / EU-DEvelopment
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: Shadow debts; shadow contingent liabilities; ECB; Global Financial Crisis; GFC; ECB; ESM; TARGET2; QE; quantitative easing; Transmission Protection Mechanism
Summary/Abstract: Based substantially on the analysis of Bob Lyddon, with whom the author has worked on several papers and reports about EU financial stability, this paper summarises the scale and scope of unrecorded and unreported liabilities that are hidden not so much by weak accounting rules but more by the careful and deliberate design. Some institutions are backed only by Eurozone member states, some by all EU member states. The effect of this practice of creating and hiding liabilities is estimated at almost doubling the combined General Government Gross Debt of the EU member states. This matters; bad for embedded but as yet relatively low inflation, and bad for the stability of the euro as a currency.

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