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

The European Monetary Union is stuck in a severe balance of payments crisis. The extent of accumulated payment deficits, as measured by the so-called Target liabilities of the GIPS countries (Greece, Ireland, Portugal and Spain), amounted to 314 billion euros in March 2011. This is the additional central bank money that their corresponding National Central Banks (NCBs) have loaned in excess of the money needed for domestic purposes to pay for a net inflow of goods and assets such as companies, stocks, government bonds or other banking claims from other countries.