Dhe balance of the Deutsche Bundesbank from the European payment system Target 2 rose above the one trillion euro mark for the first time in July. According to a report by the Deutsche Bundesbank, it amounted to 1,019 billion euros at the end of July compared to 995 billion euros at the end of June.
The increase comes as no surprise since experience has shown that the European Central Bank’s bond purchases affect the balance. The ECB is currently on the market with two bond purchase programs: In addition to the program that came into effect in 2015, it has also been buying bonds since spring as part of a program launched in connection with the Corona crisis.
Are Target Balances Dangerous?
The Deutsche Bundesbank’s balance describes claims against the European Central Bank, which in turn has claims from the payment system, among others, against the central banks in Italy and Spain. Generally speaking, balances are formed when central bank money created by a national central bank in one country in the euro area is transferred to another country in the euro area.
Since Italian government bonds are bought by the Banca d’Italia as part of ECB programs, but many sellers from outside the euro zone traditionally maintain accounts with banks in Frankfurt, when the Banca d’Italia buys an Italian government bond, central bank money is initially created in Rome . This is then transferred to the Deutsche Bundesbank via Target.
Target balances can also arise in other ways; however, the financing of current account deficits in southern Europe, which was previously the main theme, does not seem to play a significant role, since Italy has had a surplus in its current account for more than five years. The target balances have not been discussed more intensely and controversially in any country than in Germany. To date, there is no consensus among experts on important issues.