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The TARGET2 System: Solutions from a Dead End

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European Union and Monetary Union in Permanent Crisis I
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TARGET2 is a network of national central banks (NCBs) of the euro area for a single payment system as an essential part of a capital market union. In a multilateral clearing process, all intra-day bilateral liabilities and receivables are brought together and the resulting balances are transferred to the ECB at the end of a business day. This creates corresponding liabilities/receivables of these NCBs against the ECB, which testify to significant structural imbalances. The surplus countries hold unsecured, virtually valueless TARGET claims and are at high risk of blackmail in the event of a crisis. Different ways out of this dilemma are being developed.

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  1. 1.

    See Guideline of the European Central Bank of 26 April 2007 on a trans-European automated real-time gross settlement express payment system (TARGET2), ECB/2007/2, 2007/600/EC. TARGET2 is used for both national and cross-border payments in central bank money. To a limited extent, individual central banks of the Eurosystem also provide payment processing for non-euro countries, such as Denmark, Poland, Bulgaria and Romania, but only on a credit basis. See also Hansen and Meyer (2019) and Meyer (2016), pp. 35 et seq. The national TARGET balance is recorded in position A9.4 (claim) or P9.3 (liability).

  2. 2.

    Cf. Sinn and Wollmershäuser (2011) and Sinn (2018b), pp. 26 et seq. in detail.

  3. 3.

    For example, Hellwig and Schnabel (2019a), p. 554, who, based on the unity of the currency union, emphasise the integral part of the Bundesbank to the ECB and see the TARGET balances less as financial claims and liabilities than as mere accounting positions within the ECB’s internal account system. A currency union therefore knows no regional money and credit markets, as Hellwig and Schnabel (2019b), pp. 635 et seq. following this line of reasoning, proposals to limit or secure TARGET deficits are rejected because they would be contrary to a single currency.

  4. 4.

    Sinn (2018b), pp. 28 et seq. therefore refers to this type of money creation by the central bank of the importing country as ‘outside money’. The corresponding ‘inside money’ has been created by the Banca d’Italia in connection with the liquidity provision to the Italian business bank. See also Sinn and Wollmershäuser (2011), pp. 13 et seq. and p. 18.

  5. 5.

    See the 2016 question to the ECB by two MEPs, Marco Zanni (EFDD) and Marco Valli (EFDD), “how the balances would, technically, be settled, especially those in net debtor countries, should a Member State participating in the system decide to quit the single currency?” Question for written answer Z-000120/2016 (own translation). to the European Central Bank. The response of the then ECB President Mario Draghi was clear: “If a country were to leave the Eurosystem, its national central bank’s claims on or liabilities to the ECB would need to be settled in full.” Draghi letter of 18 January 2017, L/MD/17/34 (own translation).

  6. 6.

    In response to the question from the then Member of the European Parliament, Hans-Olaf Henkel (ECR) in 2017, “am I right in understanding that the ECB is accountable for this amount”, whether the ECB would also be liable for TARGET claims in the event of a country leaving, the then ECB President Mario Draghi replied differently than above: “As I had the opportunity to explain during my appearance before the ECON on 6 February 2017 and on several previous occasions, the euro is irrevocable.” Letter Draghi of 11 April 2017, L/MD/17/157 (own translations).

  7. 7.

    See the correspondence between Frank Schäffler, MdB, of 9 September 2020 and Jens Weidmann of 29 September 2020, which is available to the author.

  8. 8.

    The data at the transaction level is strictly confidential and reserved for a very limited circle. See Art. 1 para. 1 Decision of the European Central Bank of 29 July 2010 on access to certain TARGET2 data and their use (ECB/2010/9) (2010/451/EU): “For each central bank, access to the data referred to in paragraph 1 and their use for quantitative analysis and numerical simulations is limited to one employee and up to three deputies for the operation and monitoring of TARGET2.” (Own translation). No justification is given for the statement: “It is of paramount importance to preserve the confidentiality of data at the transaction level” Rn. 9, own tranlation.

    An exception is a publication by Massarenti (ECB), Petriconi and Lindner (ECB) (2012/2013). Here, data from the period January 2008 to December 2011, collected in 10-min. intervals across all Member States, already show significant fluctuations in TARGET activity during the day in terms of number and volume of bookings.

  9. 9.

    See, partly divergent, Albrecht (2018) as well as Hansen and Meyer (2019), pp. 19 et seq.

  10. 10.

    See the proposals of BÜNDNID 90/DIE GRÜNEN for a Federal Investment Fund (Bundestag-Drs. 19/16841) and DIE LINKE for state investment obligations (Bundestag-Drs. 19/15919 and 19/14375).

  11. 11.

    See the data (as of January 2020) at Statista (2021).

  12. 12.

    Cf. Streinz (2012), para. 834 et seq., who interprets this provision quite broadly, while ensuring that, as limits, a justifiable imperative to protect interests and the principle of proportionality must be guaranteed.

  13. 13.

    On average, in 2019, non-settled payments accounted for 366 transactions per day with a total volume of EUR 2.0 billion. This corresponds to 0.1% of intra-day TARGET transactions and 0.1% of intra-day TARGET turnover. See European Central Bank, 2020, pp. 27 et seq.


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Correspondence to Dirk Meyer .

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Meyer, D. (2022). The TARGET2 System: Solutions from a Dead End. In: European Union and Monetary Union in Permanent Crisis I. Springer, Wiesbaden.

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