Sunday, February 26, 2012

German people zero in on TARGET2 imbalances; may derail ESM increases

Let's for a moment continue with the topic of Google Search trends. One trend in particular indicates that the German people are becoming increasingly aware of and likely concerned with TARGET2 imbalances. The chart below shows a spike in global searches for the word "TARGET2". The bulk of those searches are coming from Germany, particularly from Hesse (likely dominated by searches out of Frankfurt).

Google search relative statistics for "TARGET2" 

The debate on the issue has sharpened as the public is becoming inpatient with the demands (at least from the German perspective) the currency union is placing on them. As one German newspaper points out, it is rare that an abstract ECB payment mechanism has attracted so much attention.
Frankfurter Allgemeine: Selten hat ein abstrakter Notenbankmechanismus in Deutschland so viel Aufmerksamkeit erregt wie die Target2-Salden des Eurosystems. Insbesondere Ifo-Präsident Hans-Werner Sinn schlägt Alarm. Ulrich Bindseil von der EZB widerspricht ihm fundamental.
The unease of the German people, many of whom perceive TARGET2 as a "backdoor" bailout, may end up derailing the Eurozone's ability to scale ESM to the desired levels.
MSN: Germany, however, has taken a tough public line on limiting public funds used for bailouts. A government official close to Chancellor Angela Merkel insisted on Sunday that there is already enough money pledged for the euro-zone's rescue fund, known as the European Stability Mechanism. Berlin has said it sees no need to combine the ESM with a temporary fund, the European Financial Stability Fund. "The German government's position is unchanged: we see no need to increase the upper limit of the ESM," said the official in Berlin.
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