Central banks earn seignorage by producing money and lending it to banks as interest-bearing loans. With the introduction of European Monetary Union, the seignorage of the national central banks was socialized. As early as 1997 Sinn and Feist pointed out that this amounts to an effective redistribution of wealth between the participant countries, since the income from interest earned by the individual national central banks differs in some cases very substantially from the amounts that the Eurosystem distributes to the national central banks. They estimate national losses of up to €67 billion. Germany and Spain are among the biggest losers: Germany because a lot of D-Marks were located in Eastern Europe and Turkey; and Spain because a large amount of cash was still being used for transactions.
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