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BookmarkFRANKFURT — In a profound signal of uneasiness about the health of the euro zone, the German central bank said Tuesday that it had nearly doubled the reserves it held to cover possible losses.
The Bundesbank said it had raised its risk provisions, or the money it sets aside to cover losses like a default on euro zone bond holdings, to €14.4 billion, or $18.7 billion, from €7.7 billion a year ago. The bank’s profit for the year, which it transfers to the German government, was little changed, rising to €664 million from €643 million.
“The crisis is not yet over despite the interim calm on financial markets,” Jens Weidmann, the Bundesbank president, said during a news conference.
The decision to set aside further billions can be interpreted as a verdict by Mr. Weidmann on European Central Bank measures he has long criticized, and which include purchases of Italian and Greek government bonds to try to keep those countries’ borrowing costs under control.
“New risks are continually being acquired and distributed among member nations,” he said as the bank presented its financial results for 2012. “This has left a clear mark on the Bundesbank’s balance sheet.”
Mr. Weidmann, a member of the E.C.B.’s Governing Council, has played the role of Cassandra as Mario Draghi, the E.C.B. president, has overseen an expansion of the bank’s powers.
Fears the euro currency union will crumble have receded since Mr. Draghi promised last year to buy the bonds of troubled countries to contain their borrowing costs. But Mr. Weidmann has often complained that the E.C.B. has gone too far, blurring the boundary between monetary policy and politics, and endangering the bank’s mandate to guard price stability above all else.
On Tuesday, Mr. Weidmann repeated his contention that the best solution to the euro zone crisis was for countries to get government spending under control and improve the performance of their economies. He said the relative calm on financial markets was due not only to E.C.B. policy, but also to progress by political leaders.
“Even with a lasting reform effort the adjustment process will take years,” Mr. Weidmann said.
The Bundesbank decision to bolster its reserves may also reinforce fears among Germans that their money is at risk because of European bank policies designed to keep the euro zone from falling apart. The Bundesbank is one of Germany’s most respected institutions, widely regarded as a bulwark against less prudent members of the euro zone.
Since 2010, the E.C.B. has acquired bonds from troubled euro zone countries valued at €209 billion, with Italian government bonds accounting for nearly half of that amount. In an attempt to encourage lending to businesses and consumers, the E.C.B. has also vastly expanded the collateral that commercial banks can post in return for cheap central bank loans.
The 17 national central banks in the euro zone, which carry out much of the work involved in running a currency union, would share the losses if a country were to default on its bonds or if collateral posted by a bank were to lose value.
Among Germans, there is widespread fear that their country would bear much more than its share of the cost if the euro zone fell apart. The Bundesbank acts as the clearinghouse for large transactions in the euro zone, and other central banks have what amount to large overdrafts.
At the news conference, Mr. Weidmann repeated warnings that France was slipping behind because of its failure to carry out economic overhauls. He also expressed concern about elections in Italy last month which failed to produce a clear winner. But he acknowledged that E.C.B. policies had not yet led to an increase in inflation.
“In the short term, we in the euro area have, if anything, declining inflation risks,” he said. Mr. Weidmann also said the German economy was in good shape.
The Bundesbank, like other central banks in the euro zone, continues to conduct much of the day-to-day work of the currency union, including making sure there is enough money in circulation, storing gold reserves and acting as the go-between for large payments between commercial banks.
Its activities generate interest income, which totaled €11 billion last year, after €8.6 billion in 2011. The Bundesbank’s profit, however, has plunged 90 percent since 2008, as the bank set aside ever larger sums to cover risk.
