Summary: Target 2 imbalances narrow but remain wide

What the chart shows: The chart shows that Target 2 imbalances, while narrower than a year ago, remain wide – and have stopped narrowing

Why is the chart important: Target 2 balances are the net claims and liabilities of banks in the euro area on each other by country. If the monetary union runs smoothly and is believed to be permanent, imbalances will be minimal – as indeed they were until the financial crisis erupted in 2008. If, however, there are concerns about the stability of the banking system in one country or about that country’s continued membership of the single currency, imbalances will widen, with ‘safe havens’ building up claims. Target 2 imbalances peaked when German banks had claims of more than 750 billion euros in August 2012. Although lower, German claims were still close to 600 billion euros in May this year. Whatever politicians and central bankers may claim, markets, companies and households do not believe that the euro area multiple crises are over,The chart shows that Target 2 imbalances, while narrower than a year ago, remain wide – and have stopped narrowing