The German Bundesbank has warned that it could face heavy losses if a major country leaves the euro and defaults on debts to the European Central Bank system, but warned that any attempt to prepare for such a crisis could backfire by triggering a speculative attack.

The analysis is highly sensitive coming just days after the insurgent Lega-Five Star government in Italy passed a decree in the Italian parliament authorizing the creation of a parallel payments system known as ‘minibots’, a scheme decried by critics as a threat to the integrity of the euro and potentially a ‘lira-in-waiting’.

While the Bundesbank text sticks to the standard line that a euro break-up is hypothetical it nevertheless admits - after years of obfuscation - that the ECB’s internal Target2 settlement system entails inescapable costs for Germany and other EMU member states should it ever happen. It also gives the impression that the monetary authorities have no clear strategy for handling such a crisis.

The conclusions will be presented to the finance committee of the German parliament on Wednesday by Burkhard Balz, the institution's head of payments. They are a response to growing alarm among the Free Democrats (FDP) and the Alternative fur Deutschland Party (AfD) over the Bundesbank’s eye-watering Target2 credits to the ECB nexus.