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TARGET2 : Symptom, Not Cause, of Eurozone Woes, No. 12-08

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TARGET2 : Symptom, Not Cause, of Eurozone Woes, No. 12-08

DATE: August 2012

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ABSTRACT: In recent years, large positive and negative balances have arisen in TARGET2, the interbank settlement and payments system of the Eurozone. These balances show that the Deutsche Bundesbank, the central bank of Germany, has become a large net creditor to the European Central Bank (ECB). Conversely, they show that central banks in the periphery nations of Portugal, Ireland, Italy, Greece, and Spain have become significant net debtors to the ECB. Critics of the Eurosystem have portrayed these balances as a "stealth bailout" of the periphery nations, but TARGET2 merely reflects persistent imbalances in current accounts and capital accounts. It does not cause them.

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Lubik, Thomas A. , Rhodes, Karl and Federal Reserve Bank of Richmond. "TARGET2 : Symptom, Not Cause, of Eurozone Woes, No. 12-08," Economic Brief (August 2012). https://fraser.stlouisfed.org/title/6034/item/583903, accessed on May 19, 2022.

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