ECB’s Mersch Says Debate Over Target2 Imbalances Is ‘Absurd’

European Central Bank council member Yves Mersch said the debate about imbalances in the euro area’s payments system, known as Target2, is “absurd.”

It is a “curious, badly informed debate,” Mersch said today while presenting the Luxembourg Central Bank’s annual report. “The debate only makes sense if you are predicting the explosion of the euro zone. This is not at all our scenario. It is completely absurd, even improper.”

Mersch said that claims being built up by Germany’s Bundesbank and the Bank of Luxembourg are similar to imbalances that went in the opposite direction a decade ago and reflect a “huge liquidity inflow,” especially into Germany.

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