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TARGET2: symptom, not cause, of eurozone woes

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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.

Suggested Citation

  • Thomas A. Lubik & Karl Rhodes, 2012. "TARGET2: symptom, not cause, of eurozone woes," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue Aug.
  • Handle: RePEc:fip:fedreb:y:2012:i:aug:n:12-08
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    Cited by:

    1. Chmielewski Tomasz & Sławiński Andrzej, 2019. "Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort," Economics and Business Review, Sciendo, vol. 5(2), pages 48-63, June.

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