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CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area

  • Philippine Cour-Thimann

This paper offers a meticulous description and analysis of the development of the Target balances, with a rich set of new data and detailed information that specialists will treasure and the general public will find illuminating. The last part of the paper, in which the author discusses measures to prevent Target balances from ballooning in the future and includes a comparison of settlement possibilities, is particularly thoughtprovoking and useful. In the US system, balance-of-payment imbalances between commercial banks and, much later, district Feds, were settled for two hundred years using gold and gold certificates; and the US system only recently adopted settlement with marketable securities. In Europe no settlement procedure for Target balances has been introduced to-date. Target balances are merely carried forward on the balance sheets of national central banks from year to year, with interest added to the debt and liability positions that have accumulated between the national central banks. This could imply risks that limit the policy choices of member countries. After all, Moody’s decided to consider downgrading the Netherlands and Germany because of their huge outstanding Target claims. It is high time for the Eurosystem partners to discuss the settlement issue more seriously.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/ZS/ZS-CESifo_Forum/zs-for-2013/Forum-Sonderheft-Apr-2013.pdf
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Article provided by Ifo Institute - Leibniz Institute for Economic Research at the University of Munich in its journal CESifo Forum.

Volume (Year): (2013)
Issue (Month): (05)
Pages: 05-50

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Handle: RePEc:ces:ifofor:v::y:2013:i::p:05-50
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  1. Hans-Werner Sinn & Timo Wollmershaeuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility," NBER Working Papers 17626, National Bureau of Economic Research, Inc.
  2. Bertola, Giuseppe & Driffill, John & James, Harold & Sinn, Hans-Werner & Sturm, Jan-Egbert & Valentinyi, Ákos, 2013. "European imbalances," Munich Reprints in Economics 20284, University of Munich, Department of Economics.
  3. Ulrich Bindseil & Philippine Cour- Thiman & König Philipp, 2011. "Weitere Anmerkungen zur Debatte um Target2 während der Finanzkrise," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(16), pages 79-86, 09.
  4. Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839, November.
  5. Corsetti, Giancarlo & Devereux, Michael P. & Guiso, Luigi & Hassler, John & Saint-Paul, Gilles & Sinn, Hans-Werner & Sturm, Jan-Egbert & Vives, Xavier, 2010. "The European economy," Munich Reprints in Economics 20104, University of Munich, Department of Economics.
  6. Silvia Merler & Jean Pisani-Ferry, 2012. "Sudden stops in the euro area," Policy Contributions 718, Bruegel.
  7. Buiter, Willem H. & Rahbari, Ebrahim, 2012. "Target2 Redux: The simple accountancy and slightly more complex economics of Bundesbank loss exposure through the Eurosystem," CEPR Discussion Papers 9211, C.E.P.R. Discussion Papers.
  8. Hans-Werner Sinn, 2012. "Target Losses in Case of a Euro Break-up," CESifo Working Paper Series 3968, CESifo Group Munich.
  9. Karl Whelan, 2012. "TARGET2 and Central Bank Balance Sheets," Working Papers 201229, School of Economics, University College Dublin.
  10. Bindseil, Ulrich & Winkler, Adalbert, 2012. "Dual liquidity crises under alternative monetary frameworks: a financial accounts perspective," Working Paper Series 1478, European Central Bank.
  11. Martin Handig & Robert Holzfeind & Clemens Jobst, 2012. "Understanding TARGET 2: The Eurosystem’s Euro Payment System from an Economic and Balance Sheet Perspective," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 81–91.
  12. Raphael A. Auer, 2014. "What drives TARGET2 balances? Evidence from a panel analysis," Economic Policy, CEPR;CES;MSH, vol. 29(77), pages 139-197, 01.
  13. Philippine Cour-Thimann & Bernhard Winkler, 2012. "The ECB’s non-standard monetary policy measures: the role of institutional factors and financial structure," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 765-803, WINTER.
  14. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target Balances and the German Financial Account in Light of the European Balance-of-Payments Crisis," CESifo Working Paper Series 4051, CESifo Group Munich.
  15. Ulrich Bindseil & Philippine Cour-Thimann & Philipp König, 2012. "Target2 and Cross-border Interbank Payments during the Financial Crisis," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 83-92, 02.
  16. Hans-Werner Sinn, 2012. "Die Target-Kredite der Deutschen Bundesbank," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65, pages 03-34, 03.
  17. Hans-Werner Sinn, 2012. "Die Target-Falle: Gefahren für unser Geld und unsere Kinder," Books, by Staff of the Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 2012001, November.
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