Target Risks without Euro Exits

The Bundesbank’s Target claims arose as a result of its enforced lending to other European central banks based on Eurosystem rules. Today, it is undisputed that these claims are at risk if Target debtors leave the Eurosystem. But what about the Target risks if the euro continues to exist with all members? This article shows that Target balances imply real risks for credi- tor countries even if no one leaves, and it presents var- ious ways of limiting the balances. These limitations would not impair the functioning of the monetary union and the common capital market; in fact, quite the opposite is true.