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Eurosystem debts do matter

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  • Whittaker, John

Abstract

Since September 2015, the European Central Bank has been publishing Target2 balances of the eurozone national central banks. But this presents an incomplete picture of intra-eurosystem debts because it does not include those arising from the issue of banknotes. The ECB also plays down the importance of Target2 debts as a “normal feature of the decentralised implementation of monetary policy in the euro area”. But if Greece were to leave the euro and its eurosystem debt (currently €114bn) were written off, other eurozone countries would bear the loss, in addition to losses on official loans. There is no effective mechanism for limiting eurosystem debts. And exit risk – the risk that Greece or some other eurozone country with large eurosystem debts will leave the euro – will always be present.

Suggested Citation

  • Whittaker, John, 2016. "Eurosystem debts do matter," MPRA Paper 69235, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69235
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    File URL: https://mpra.ub.uni-muenchen.de/69235/1/MPRA_paper_69235.pdf
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    References listed on IDEAS

    as
    1. Sinn, Hans-Werner, 2017. "The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs," OUP Catalogue, Oxford University Press, number 9780198791447.
    2. Whittaker, John, 2011. "Eurosystem debts, Greece, and the role of banknotes," MPRA Paper 38406, University Library of Munich, Germany.
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    Cited by:

    1. Whittaker, John, 2020. "Financial support for Italy will be costless," MPRA Paper 101025, University Library of Munich, Germany.
    2. Sergio Cesaratto, 2017. "The Nature of the Eurocrisis. A Reply to Febrero, Uxò and Bermejo," a/ Working Papers Series 1703, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    3. 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.
    4. David Blake, 2023. "Target2: The Silent Bailout System That Keeps the Euro Afloat," JRFM, MDPI, vol. 16(12), pages 1-126, December.

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    More about this item

    Keywords

    Target2; eurosystem; monetary union; euro banknotes;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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