Fear of Italy leaving the euro has driven Germany’s surplus with the European Central Bank to a record €956 billion. But economists say this surplus could vanish overnight if a real crisis hit.

Just try calling in this debt.

Germany’s surplus with the European Central Bank hit a new record in April. Germany is currently owed around €950 billion ($1.12 trillion) under the ECB’s Target2 clearing system, which balances out cross-border financial movements within the euro zone.

That figure represents about half of Germany’s entire foreign asset surplus, the amount that the rest of the world theoretically owes the country. It sounds like a huge amount of money, but some economists say it may be worth far less than meets the eye. If the euro zone were to break up, or if a country like Italy left the system, the surplus could evaporate overnight.

Hans-Werner Sinn, the former head of Ifo Institute for Economic Research, a leading economic think tank, told Handelsblatt the figure was basically worthless — an “unsecured credit against the Eurosystem, which cannot be called in and which debtor countries pay no interest on.” A private company would simply write off the amount, he added.

Economists say there are three possible reasons for Germany’s Target2 surplus and for rising deficits in countries like Italy and Spain. Imbalances can occur when a country has a large export or import surplus with the rest of the bloc. Surpluses also resulted from the ECB’s bond-buying program, under which it bought financial assets across the euro zone in order to pump money into the European economy.

Investors getting nervous

But a German surplus could also be a sign that foreigners are depositing money in German banks and buying German financial assets. Now that the ECB is winding down its bond-buying, experts say the latest bump in Germany’s Target2 surplus is probably capital flight from Italy and other southern European countries, as investors seek a safe haven for their money.

Rome’s protracted political crisis last month prompted nervousness among Italy’s investors. Already in April, Italy and Spain’s Target2 deficits were the highest in the euro zone, at €426 billion and €389 billion respectively. Portugal and France also show negative balances. Figures for May are not yet available.

No one quite knows would happen to the Target2 system in the event of a high-deficit country leaving the Eurosystem. Last year, ECB president Mario Draghi told the European parliament that any deficits would have to be repaid. But it appears that countries have no binding legal obligation to do so; it is simply “guidance” from the ECB.

If Italy were to withdraw from the euro zone, its banks’ assets and liabilities would be redenominated in its new currency, which would probably see a steep fall in value. The question then would not only be whether Italy should pay its Target2 deficit, but how it possibly could. The Bank of Italy would almost certainly default on a bill for half a trillion euros.

Damage may already be done

Bundesbank, Germany’s central bank, confirmed for Handelsblatt that the Target2 surplus counts as part of Germany’s foreign asset surplus, even though it pays no interest. And it could disappear overnight if the euro zone gets into trouble. For Mr. Sinn, this suggests that the damage has already been done. “If we lost it, we would only lose a worthless debt,” he said.

The financial markets' reactions to the Italian crisis suggest the euro zone could again be heading for choppy waters. In the last three weeks, yields on Italian government bonds climbed from 1.8 percent to 2.8 percent. By contrast, Germany, regarded as a far better risk, can currently borrow at 0.5 percent.

Analysts at JPMorgan blame rising Italian borrowing costs on nervousness about a possible Italian exit from the euro, although the new government has toned down its euro-skepticism since taking office. But in the event of Italy leaving the system, they say, “Target2 surpluses would above all be a problem for creditor nations.” And that would be a trillion euros going up in smoke.

Norbert Häring covers monetary policy, exchange rates, credit markets and economic theory for Handelsblatt. Brían Hanrahan adapted this story for Handelsblatt Global. To contact the author: [email protected]