Target loans, current account balances and capital flows: the ECB’s rescue facility

Hans-Werner Sinn, Timo Wollmershäuser

International Tax and Public Finance 19 (4), 2012, S. 468-508, CESifo Working Paper Nr. 3500, Juni 2011, NBER Working Paper Nr. 17626, November 2011.


This paper presents the first comprehensive Target database of the Eurozone and interprets it from an economic perspective. We show that the Target accounts measure the intra-Eurozone balances of payments and indirectly also international credit given through the Eurosystem in terms of reallocating the ECB’s net refinancing credit. We argue that the Euro crisis is a balance-of-payments crisis similarto the Bretton Woods crisis, and document to what extent the Target credit financedthe current account deficits and outright capital flight in Greece, Ireland, Portugal,Spain and Italy. To prevent the ECB from undermining the allocative role of the capital market, we propose adopting the US system of credit redemption between the District Feds.

JEL Klassifikation:

[E500] Monetary Policy, Central Banking, and the Supply of Money and Credit: General

[E580] Central Banks and Their Policies

[E630] Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

[F320] Current Account Adjustment; Short-term Capital Movements

[F340] International Lending and Debt Problems

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