ECB money piles up in
Germany as investors wary of risk: Bundesbank
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[March 20, 2017]
(Reuters) - Money created by the European Central Bank to shore up euro
zone growth and inflation is piling up in Germany as investors are
reluctant to venture outside the bloc's strongest economy, Bundesbank
data showed on Monday.
A large amount of the money printed by the ECB to buy bonds is landing
in German bank accounts, often held by foreign investors, and staying
This is pushing up the Bundesbank's net credit with the ECB's Target 2
system for settling cross-border payments in the euro zone, which rose
to a record high of 814 billion euros ($875.13 billion) in February.
In the same month, Italy's Target 2 liabilities hit an all-time high of
386.1 billion euros, which the Bank of Italy blamed on factors including
Italians investing their savings abroad and the ECB's bond purchases.
In its monthly report, the Bundesbank said this money does not then flow
to other parts of the euro zone, even though bond yields tend to be
there higher than in Germany.
That showed investors' reluctance to put their cash to work in weaker
economies and raised questions about the effectiveness of the ECB's
"It is remarkable ... that these second-round effects of the APP ... are
not taking place in some countries, including Germany," the Bundesbank
said in its monthly report.
The ECB declined to comment. Last year, the central bank said growing
Target 2 imbalances simply reflected purchases of bonds by central banks
from sellers located in different euro zone countries.
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The European Central Bank (ECB) headquarters is pictured in
Frankfurt, Germany, December 8, 2016. REUTERS/Ralph Orlowski
Before the euro zone debt crisis that peaked in 2012, money flowed out
of Germany to seek higher returns in countries such as Greece, Spain or
That trend reversed after 2010 as the crisis escalated and confidence in
debt-laden countries has yet to be re-established despite the ECB's
The German economy has continued to expand and will do so in the near
future, the Bundesbank said in its report, citing very strong industrial
output driven by high demand from within the EU's economic powerhouse
and from abroad.
Target 2 claims and liabilities of the national central banks in the
euro zone are not a problem as long as the currency union exists.
But if the euro zone should break up, debtors -- the national central
banks of countries leaving the bloc -- would have to pay the money back.
(Reporting by Andreas Framke; Editing by Catherine Evans)
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