Special Issue: The European Balance of Payments Crisis

The European Monetary Union is currently experiencing a serious internal balance of payments crisis that is similar, in many important ways, to the crisis of the Bretton Woods System in the years prior to its demise. In response to the crisis, the eurozone countries have mobilized enormous public rescue funds as of May 2010.

However, funding really started some 2.5 years prior to that point, in the autumn of 2007, when some eurozone countries began to draw Target loans out of the ECB system which happened to come largely from the German Bundesbank, recently also from the Dutch central bank, and amounted to sums that dwarf these countries’ participation in the official rescue packages.

The Ifo Institute has published several papers on this topic in 2011 and has effectively created the first comprehensive eurozone Target database.

Today it is the economic interpretation of events, rather than the facts, which is controversial. For this reason we have compiled various opinions in a special issue of the CESifo Forum. The authors range from current representatives of the Bundesbank and the ECB, who wish to convey a sense of normality, to Helmut Schlesinger, ex-Bundesbank President and Georg Milbradt, the former Minister President and Finance Minister of Saxony, who express their deep concern regarding the Target balances. Schlesinger explicitly criticises the reassuring statements issued by his former institution. The economists from universities and banks who submitted comments basically share Schlesinger’s view emphasizing, among other things, the parallels to other balance of payments crises.

To facilitate the readers’ familiarisation with the topic, the Ifo Institute’s views on the facts presented in earlier publications are summarised in the special issue.

Contents:

+ Sinn, Hans-Werner: The European Balance of Payments Crisis: An Introductionfree (PDF, 377 KB)

+ Schlesinger, Helmut: The Balance of Payments Tells Us the Truth

+ Kohler, Wilhelm: The Eurosystem in Times of Crises: Greece in the Role of a Reserve Currency Country?

+ Blankart, Charles B.: The Euro in 2084

+ Neumann, Manfred J.M.: The Refinancing of Banks Drives Target Debt

+ Bernholz, Peter: The Current Account Deficits of the GIPS Countries and Their Target Debts at the ECB

+ Mayer, Thomas, Jochen Moebert and Christian Weistroffer: Macroeconomic Imbalances in EMU and the Eurosystem

+ Milbradt, Georg: The Derailed Policies of the ECB

+ Homburg, Stefan: Notes on the Target2 Dispute

+ Sell, Friedrich L. and Beate Sauer: Money, Capital Markets and Welfare: An Analysis of the Effects of Target2 Balances

+ Sauer, Ingo

+ Ulbrich, Jens and Alexander Lipponer: Balances in the Targe2 Payments System – A Problem?

+ Fahrholz, Christian and Andreas Freytag: A Way to Solve the Euro pean Balance of Payments Crisis? Take a Chance on Market Solutions!

+ Bindseil, Ulrich, Philippine Cour-Thimann and Philipp Koenig: Target2 and Cross-border Interbank Payments during the Financial Crisis

+ Zeitler, Franz-Christoph: Ways Out of the European Sovereign Debt Crisis after the Decisions of the July 2011 Summit

+ Reeh, Klaus: Balance of Payments Adjustment in the Monetary Union: Current Events Help Shed New Light on an Old Question

+ Tornell, Aaron and Frank Westermann: Greece: The Sudden Stop That Wasn’t