Livia Chiţu, Barry Eichengreen, Arnaud Mehl, Gary Richardson, 15 July 2014

The European debt crisis has triggered debates over the TARGET2 imbalances. This column discusses gold flows across Federal Reserve districts and points to the similarity of such operations to liquidity flows from Eurozone’s ‘core’ to its ‘periphery’. Though the institutional setting in Europe differs, important lessons can be drawn from the US example. Cooperation between regional Reserve Banks was essential for the cohesion of the US monetary union. Such cooperative spirit will be important for the smooth operation of the Eurozone.

Paul De Grauwe, Yuemei Ji, 02 November 2012

A systemic Eurozone breakup would be the mother of all financial crises. This column – a rejoinder to Hans-Werner Sinn’s recent column – agrees that Germany would lose massively from a breakup, but argues that the ultimate source is the €600 billion current account surpluses it ran with other EZ nations during the good years, not the TARGET2 system. German banks lent vast amounts to peripheral countries without doing a proper credit analysis. No one other than Germany itself is responsible for taking on these risks.

Hans-Werner Sinn, 22 October 2012

Evaluation of the financial costs of a Eurozone breakup depends critically on the interpretation of the balances central banks hold in the EZ payment system. This column, which replies to the interpretation by De Grauwe and Ji, argues that TARGET balances represent real wealth that would be lost in a breakup.

Frank Westermann, 16 October 2012

With confidence in the Eurozone at an all time low, the problem of large-scale capital flight has come to the fore. This column argues that a common deposit insurance scheme as outlined in proposals for a banking union within the Eurozone would by itself not provide a solution to the problem.

Paul De Grauwe, Yuemei Ji, 18 September 2012

Germany’s large accumulation of TARGET2 claims has created fear that Germany stands to lose vast amounts of wealth if the Eurozone were to break down. After clarifying the issues using basic economic principles, this column shows that Germany could avoid large wealth losses by restricting euro-to-mark conversions to German residents.

Daniel Gros, Thomas Mayer, 28 August 2012

Large German trade surpluses are ingrained in the Eurozone’s structure, but private sector mechanisms for dealing with the corresponding capital account deficit are broken. The unavoidable result has been large official capital account deficits by Germany (the bailouts) and the Eurosystem (Target2 balances). This column proposes the creation of a Germany sovereign wealth fund that would restart the private recycling of Germany’s excess savings – eventually cleaning out the Target2 imbalances and depreciating the euro in the process.

Sebastian Dullien, Mark Schieritz, 07 May 2012

The Eurozone debt crisis has led to increasing imbalances among Europe’s central banks, the causes and consequences of which are the subject of fierce debate. But this column argues that the discussions are missing a fundamental point – the extent to which the German financial sector and German savers benefit from this arrangement.

Karl Whelan, 29 April 2012

In recent years, instability in many European countries has led to large transfers of money into Germany. This in turn has led the Bundesbank to build up large credits with other central banks in Europe – via the TARGET2 system. Does this represent a risk to Germany in the event of a breakup of the euro? This column argues that Germany will have far bigger things to worry about.

Hans-Werner Sinn, 10 March 2012

In February 2012, the Bundesbank had a TARGET claim of €547 billion on the Eurosystem. This column proposes a US-like system of marketable covered treasury bills that could be applied to a yearly settlement of TARGET liabilities.

Ashoka Mody, Fabian Bornhorst, 07 March 2012

While the fall in Germany’s current-account surplus may have alleviated the Eurozone’s imbalances, another problem has arisen. This column argues that German exporters and banks are no longer Europe’s financiers but Germany is instead now filling this financing gap through so-called TARGET claims – the system for central bank settlements within the Eurosystem. At stake is not just academic curiosity but the financial architecture of the Eurozone.

Aaron Tornell, Frank Westermann, 28 September 2011

With economists’ eyes fixed squarely on Greece, this column tries to solve a puzzle. Since 2008, tens of billions of euros have fled Greek bank accounts. Yet somehow the country still has a current-account deficit. Where has this money come from?

Willem Buiter, Ebrahim Rahbari, Juergen Michels, 06 September 2011

The Eurozone money transfer system, TARGET2, has huge imbalances whose meaning is subject to much debate. This column introduces a new CEPR Policy Insight by Citigroup Chief Economist Willem Buiter and co-authors that sorts out the issues. It argues that the imbalances show some banks can’t fund themselves without public support. This is a wakeup call – Eurozone banking systems must rapidly be put on sound footing.

Willem Buiter, Ebrahim Rahbari, Juergen Michels, 06 September 2011

The Eurozone money transfer system, TARGET2, has huge imbalances whose meaning is subject to much debate. This Policy Insight by Citigroup Chief Economist Willem Buiter and co-authors argues that the imbalances show some banks can’t fund themselves without public support.

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