European Economics

European Economics Focus

2 March, 2018

TARGET2 imbalances highlight euro-zone’s continued problems

The large imbalances in the euro-zone’s TARGET2 payments system indicate that all is still not quite right in the region. There are some good reasons to expect the imbalances to narrow again over the next few years. But there is also a risk that sentiment towards the periphery deteriorates again, resulting in renewed capital flight and an even further worsening of the TARGET2 imbalances – with the upcoming Italian election an obvious risk.

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