Central Banking

Target2’s missing settlement mechanism creates systemic risk

Hans-Werner Sinn

Target2, the cross-border payments system operated by the Eurosystem, has become a credit channel in favour of southern European countries, creating "huge imbalances" in the process, according to an article by Hans Werner Sinn in the latest edition of the Central Banking Journal.

Sinn, a professor of economics and public finance at the University of Munich and president of the Ifo Institute in Germany, says the problem was caused – and perpetuated – by the lack of a settlement requirement in the

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