Any country leaving the eurozone would have to settle its claims or debts with the bloc’s payments system before severing ties, European Central Bank President Mario Draghi has said.
The comment, a rare reference by Draghi to the possibility of the currency zone losing members, came in a letter to two Italian lawmakers in the European Parliament released on Friday (20 January).
It coincides with a groundswell of anti-euro sentiment in Italy and other eurozone states, fuelled in part by last June’s unprecedented decision by the United Kingdom to leave the EU.
“If a country were to leave the Eurosystem, its national central bank’s claims on or liabilities to the ECB would need to be settled in full,” Draghi said in the letter.
Based on November data from the Target 2 payment system, that would leave Italy with a €358.6 billion tab. The system records flows of payments between eurozone countries.
The threat of defaults on cross-border debts has often been credited as one element keeping the eurozone together throughout the financial crisis.
As these payments are not generally settled, weaker economies including Italy, Spain and Greece have accumulated huge liabilities towards Target 2 while Germany stands out as the biggest creditor with net claims of €754.1 billion.
Target 2 imbalances have worsened in recent months, with Harvard economist Carmen Reinhart warning of capital flight from Italy.
In the letter, Draghi reiterated that the imbalances were due to the ECB’s own bond buying-programme, where many of the sellers are foreign investors with accounts in Germany, and ensuing portfolio rebalancing.
Draghi’s comments come after the ECB announced that it was satisfied with its current monetary policy and insisted that it would continue with business as usual for the foreseeable part of 2017.