Reading stories like this absolutely astound me. The trash on the books of the German banks is worth exactly as much as it has ever been worth -- i.e., not much. All that can be really said about it is that the fact that the trash has to someday be written down to its real value will be seriously annoying to whoever owns the trash at the time -- which likely is *not* going to be the German banks, but is almost 99.9% certain to be the European Central Bank (ECB).
Yes, this means the ECB will show paper losses on their equivalent of the Federal Reserve's "cash for trash" thingy. So what? The money lost never existed in the first place, until printed by the ECB in order to exchange for trash. Easy come, easy go.
For those cretins who claim, "but printing all this money will create inflation!" -- err, no. The money "exists" on the books today (in the form of the artificial values of the trash on the banks' books). You aren't "printing" money by exchanging cash for trash, you're simply changing money from one form into another, since you're silently un-printing the newly printed money when you write down the trash. The end result has no (zero) effect upon inflation, because there isn't a single Euro on bank balance sheets that wasn't already there even if just fictionally as artificially high values on trash.
Indeed, the only thing that trash-for-cash does is prevent *DEFLATION*, since banks writing down the trash is the same thing as un-printing money insofar as effect upon their balance sheets is concerned. Printing money to make up for the un-printed money is just status quo. So why do we continue to get stories like this from the likes of the Financial Times, and from conservative finance writers in general? It's as if the invention of the printing press in 1450 completely escaped their notice, nevermind the invention of computers by Alan Turing and John Von Neumann, which made printing money even easier because it doesn't even require paper anymore!
-- Badtux the Baffled-by-stupidity Penguin