Target Losses in Case of a Euro Break-up

Hans-Werner Sinn

No 3968, CESifo Working Paper Series from CESifo

Abstract: Evaluation of the financial costs of a Eurozone breakup depends critically on the interpretation of TARGET balances. While it has been argued that TARGET claims in the Eurozone can be written off without incurring any losses on the claimants as the value of fiat money is independent of the claims of a national central bank, the present paper shows that TARGET claims represent a shift of the ECB's refinancing credit to the crisis countries and thus a claim on the interest return from the commercial banks of these countries. If TARGET claims were to be written off, a loss of real wealth would occur to the amount of the present value of this interest return, which is exactly measured by the amount of the TARGET claims.

Keywords: currency union; balance of payments; Eurosystem; Target2 (search for similar items in EconPapers)
JEL-codes: E50 E58 F32 F34 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Target Losses in Case of a Euro Breakup (2012)
Working Paper: Target losses in case of a Euro breakup (2012)
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