Here is an excellent quote from BNP Paribas on the Eurozone crisis. They point out Germany's false belief that the nation avoided extensive periphery exposure by limiting decisive crisis fighting measures. Instead Germany became exposed via the "back door" channels.
BNP Paribas: - ... We believe the German approach has been one of false economy. The mutualisation of country risk has occurred through the back door, but with far worse consequences for market dynamics than had sufficient resources been committed earlier.
Why do we say this? One euro too little, one day too late has always been a formula for mutating and strengthening the crisis. It’s a bit like a course of antibiotics – too low a dose, administered for too short a period, results in a more resilient and more difficult strain to beat. Isn’t that what we have now? At one stage, EUR100bn was a serious amount of money that bought serious relief in the market. Now, EUR100bn for Spain’s banks is shrugged off in a day.
Because of the progressive worsening of the crisis, the hidden costs of failure have mounted. These can be counted in two ways: first, the increase in the size of the ECB’s balance sheet, accompanied by a worsening of the quality of credit it takes as collateral, and second, the increased size of the TARGET2 balances, now exceeding EUR 900bn.
Germany’s reluctance to commit funds to resolve the eurozone crisis has resulted in it having greater exposure than it would otherwise have had – but through the back door rather than the front.