"Normally, a country’s current-account deficit (trade deficit minus transfers from other countries) is financed with foreign private capital. In a currency union, however, central-bank credit may play this role if private capital flows are insufficient. This is what happened in the eurozone when the interbank market first broke down in mid-2007.
"The PIGS’ own central banks started to lend newly printed money to their private banks, and this money was then used to finance the current account deficit. These funds went to the exporting countries, where they circulated as part of normal transactions. The exporting countries’ central banks responded by reducing their emissions of fresh money to be lent to the domestic economy. In effect, central-bank money lending in exporting countries, above all in Germany, was diverted to the PIGS."
Read the rest, The ECB’s Secret Bailout Strategy, if you are into EZ government finance and where it is headed.