Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277283 
Year of Publication: 
2013
Citation: 
[Journal:] European Journal of Economics and Economic Policies: Intervention (EJEEP) [ISSN:] 2052-7772 [Volume:] 10 [Issue:] 3 [Year:] 2013 [Pages:] 359-382
Publisher: 
Edward Elgar Publishing, Cheltenham
Abstract: 
The paper provides an account of the meaning and implications of TARGET2 in the eurozone (EZ) balance of payments crisis. In this context, it discusses Hans-Werner Sinn's thesis about a stealth bail-out of the EZ periphery by the ECB from a heterodox perspective. Financial liberalisation, a relatively loose monetary policy and the provisional fading of devaluation risks generated ephemeral growth in some peripheral EZ countries sustained by capital flows from core countries. This has been followed by real exchange rate revaluation and deterioration of foreign accounts. As a result, external financing flows dried up and the previous stock of loans began to be repatriated. TARGET2 has played a fundamental role in avoiding a precipitous crisis. This distinguishes the European crisis from more traditional balance of payments crises. However, the presence of TARGET2 does not offset the absence of the financial crisis prevention and resolution mechanisms that are characteristic of fully fledged political and currency unions.
Subjects: 
European Monetary Union
financial crisis
Germany
neo-mercantilism
balance of payment
capital flows
sudden stops
TARGET2
OMT
JEL: 
E11
E12
E42
E58
F32
F33
F34
F36
N24
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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