Eurosystem debts do matter

Whittaker, John (2016): Eurosystem debts do matter.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Target2, eurosystem, monetary union, euro banknotes
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions

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