European Central Bank President Mario Draghi's apparent lack of concern about growing imbalances in money being transferred between eurozone countries has revived criticism from those who see the issue as a budding new crisis.
Hans-Werner Sinn, the president of the influential German think tank Ifo, sparked a debate last year by arguing that stronger countries such as Germany were financing the deficit extravaganzas of Greece, Portugal and Ireland via the bloc's cross-border payment system, known as TARGET2.
Essentially, weaker economies have built up liabilities that are making the stronger ones vulnerable. The latter would be in particular danger if the eurozone breaks up — which few expect — but critics say the stresses pose threats even without that.
When asked, however, during the ECB's monthly press conference on Thursday whether such dynamics could hurt Germany's credit rating, Draghi rebuffed the idea, saying such developments were normal and inherent in a monetary union.
"When funding conditions become stressed in some parts of the euro area, then you see that the countries that are not stressed accumulate claims towards the countries that are under stressed conditions," Draghi said.
"But this does not imply any more risk for the so-called creditor countries."
Central banks in Greece, Portugal, Spain and Ireland have run up large TARGET2 liabilities as cross-border loans dried up, the private sector withdrew capital and banks turned to the ECB for funding because banks from the stronger economies stopped lending to them.
Germany's Bundesbank, on the other hand, has accumulated TARGET2 claims as more money was transferred into the country than went out.
Central banks hold these claims and liabilities against the ECB, which acts as a middleman for the transfers.
Reacting to Draghi's comments, Sinn said such imbalances were indeed normal, but not on the scale currently seen.
"Target balances measure a money flow and an inverse credit flow between the central banks enabling countries to electronically print more money than they need for their own internal circulation," Sinn told Reuters said in an email.
He has previously said that this means that in the end, there will be less credit available for German companies, and that Germany's credit risk is boosted.
"After all, the extra refinancing credits measured by the TARGET balances involve exactly the kind of credit risk for the core countries as the Luxemburg rescue facility (the European Financial Stability Facility) does," Sinn said.
Such views have been widely contradicted by the Bundesbank, the ECB and others who point out that TARGET2 is a closed system, which does not create new liquidity and that the ECB's full allotment policy means that all banks get all the money they want.
But this does not assuage Frank Westermann of Osnabrueck University, who published a paper with the University of California's Aaron Tornell in December arguing the Bundesbank will soon run out of assets to fund further loans to the eurozone.
"This is neither normal nor is it true that there is no risk. There is a risk and it has grown immensely," he told Reuters when asked about Draghi's recent comments.
"If the eurozone breaks up, it is unclear how the Bundesbank will get back the 460 billion euros it has accumulated in TARGET2 claims so far. This number is large when compared to the federal budget of only 300 billion euros and one should think about this," he said.
The Bundesbank has said that there is no immediate change in the level of risk due to the rise in TARGET2 claims. The claims and liabilities gathered by national central banks via TARGET2 rather reflect the distribution of the ECB's extra liquidity.
And this is where the main risk for central banks stems from. To ease banks' funding strain, the ECB is providing banks with unlimited funding and has relaxed the collateral rules, which has as a result more than doubled its balance sheet.
Since all the eurozone central banks are jointly liable for losses, it does not make a difference which central bank has a positive balance if it comes to a loss.
Should Greece or any other country default or exit the eurozone, the remaining eurozone countries would have to divide the losses based on the proportion of the ECB's capital they provide, regardless of who holds a positive TARGET2 balance.
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