The crisis in the Area Zone and the role of ECB

• Author: Jonida Lamcja - Ada Aliaj - Enida Istrefi- Rovena Troplini - Juljana Imeraj
• Pages: 190-195

Vol. 2 No. 2

July 2016

Academic Journal of Business, Administration, Law and Social Sciences

IIPCCL Publishing, Tirana-Albania

ISSN 2410-3918

Acces online at www.iipccl.org

190

The crisis in the Area Zone and the role of ECB

Msc. Jonida Lamcja

Dr. Ada Aliaj

MscEnidaIstre

PhD Rovena Troplini

Dr. Juljana Imeraj

Abstract

ThispaperpresentstherstcomprehensiveTargetdatabaseoftheEurozoneandinterpretsit

from an economic perspective. We show that the Target accounts measure the intra-Eurozone

balances of payments and indirectly also international credit given through the Eurosystem

intermsofreallocatingtheECBsnetrenancingcreditTheTargetandliabilitiesareinterest

bearing. TheirinterestrateequalstheECBsmainrenancingrateHoweverinterestrevenues

and expenses are socialized within the Euro system.

ManythinkthattheTargetimbalancesareanormalsideeectoftheEurozonepaymentsys-

tem, as they won’t occur in a currency system. The term Target balances has created much

confusion even among academics; because it is a catchy term with several meanings that are

notobviouslyconnectedwitheachotheratrstglance In several countries, private debts aris-

ing from a property booble were transferred to sovereign debt as a result of banking system

bailouts and government responses to slowing economies post-bubble.

Keywords: Currency union, Balance of payments, Bailout, Euro system, Target.

Introduction

This paper investigates the Target balances, an accounting system hidden in remote

corners of the balance sheets of the Eurozone’s National Central Banks (NCBs), to

analyzetheEurozonesinternalimbalancesThereallocationofrenancingcreditwas

apubliccapital owthroughtheECBsystem thathelpedthecrisiscountries inthe

samesenseastheocialcapitalowsthroughtheformaleurorescuefacilitiesEFSF

EFSM and the like) did, but it actually came much earlier, bypassing the European

parliaments. It was a rescue program that predated the rescue programs. As we will

showbyreplacingstallingcapitalimportsand outrightcapital ightTargetcredit

nancedsubstantial portions ifnot most ofthecurrent account decitsofGreece

andPortugalduring therstthreeyearsofthecrisisanda sizeablefraction ofthe

SpanishcurrentaccountdecitThedetailedcausesofthedebtcrisisvariedInseveral

countries, private debts arising from a property bubble were transferred to sovereign