Capital flight from one Eurozone country to another, continues to rise. That capital flight is a measure of trust of of a nation’s banks.
Capital flight is ongoing in Spain, Italy, Greece, France, and Portugal in that order. The recipient countries are Germany, Luxembourg, Finland, and the Netherlands in that order.
Some charts and tables will help provide a clear picture.
Data for the following charts and tables is from ECB Target Balances, a measure of capital flight. Neither the ECB nor Eurozone officials likes to discuss these numbers for obvious reasons.
The ECB-generated chart below shows Target2 changes over time. However, tracking 20 lines by colors is more than a bit problematic.
Here is the ECB’s chart with my annotations in blue. My charts and tables follow.
Target2 Balances Over Time
February Target2 Balances
The above chart shows where the money is coming and going, and by how much.
Cyprus actually has the 5th largest positive balance (thanks to capital controls and forced bail-ins). A few other countries have positive balances, and there are other countries with smaller negatives.
Monthly Changes in Billions of Euros
| Country | Symbol | Jan Target2 Balance | Feb Target2 Balance | Month-Over-Month Change |
|---|---|---|---|---|
| Spain | ES | -248.26 | -263.16 | -14.9 |
| Italy | IT | -251.26 | -249.53 | 1.73 |
| Greece | GR | -94.62 | -95.21 | -0.59 |
| Portugal | PT | -60.46 | -66.90 | -6.44 |
| ECB | ECB | -92.02 | -98.16 | -6.14 |
| France | FR | -42.05 | -68.08 | -26.03 |
| Germany | DE | 587.00 | 605.01 | 18.01 |
| Luxembourg | LU | 145.92 | 147.45 | 1.53 |
| Netherlands | NL | 60.63 | 58.59 | -2.04 |
| Finland | FI | 45.85 | 72.41 | 26.56 |
| Cyprus | CY | 2.55 | 2.32 | -0.23 |
Aggregate Changes
| Feb Sum of Positives and Negatives | Jan Sum of Positives and Negatives | Month-Over-Month Change |
|---|---|---|
| -841.04 | -788.67 | -52.37 |
| +885.78 | +841.95 | +43.83 |
Comments
- The six-country negative sum for February is -€841.04 billion.
- The five-country positive sum for February is +€885.78 billion.
- Since the numbers total zero, the rest of the imbalance is spread out over the remaining eurozone countries.
- In the last month, another +€52.37 billion fled the deficit entities to creditor countries.
Note the ECB itself sports a negative balance to the tune of -€98.16 billion. I don’t have an explanation for precisely how this happens.
Those needing a further explanation of Target2 may wish to consider Discussion of Target2 and the ELA (Emergency Liquidity Assistance) program; Reader From Europe Asks “Can You Please Explain Target2?”
The key point is the deficit banks and countries are insolvent. German taxpayers are going to bear the brunt of this mess when it implodes.
Mike “Mish” Shedlock
I’m sure Obama and the FED will manage to get the US taxpayers exposed heavily.
Could find nothing on ECB liabilities under Target2 , the ECB seems to have been incorporated in 2008 , or maybe only provided its data from then . Spent three hours trying to search it up and nothing . Hope someone can explain how it participates … it is probably very simple . Is there a possible conflict of interests in that , I was reading , Target2 liabilities are charged the main rate in interest – hence 0% would benefit ECB accounts .
“Thanks for the comment. In fact, Target 2 liabilities are charged interest at the main ECB rate (currently 0.5%). This is paid by those with large liabilities (Greece, Italy, Spain) and transferred to those with large claims such as Germany.”
http://openeuropeblog.blogspot.com.es/2013/06/more-of-same-expected-from-ecb-despite.html
The outflow of the ECB funds could very well explain the drop in US 10 yr Treasury yields despite the first FED funds rate increase of the cycle. Also note the relative weakness of European financial markets relative to the US markets. European markets sold off stronger in January than did the US markets. European markets have retraced 50% at best, while the US markets have nearly erased the beginning of the year pullback. This flow of funds into US markets is providing liquidity on behalf of the FED.
I think, in the end, the people fleeing in a financial sense from one Euro country to another will find their escape worthless. You can be assured those German banks know the physical location of everyone of those new depositors. When their countries leave the Euro, their shiny new German bank accounts will be “appropriately” redenominated.
Unless the wealthy move to where their money is. Like what has already happened in London.
Southern European culture is distinctly corrupt. Should we blame the genetic proximity to Africa or the Catholic Church?
Some will be tempted to buy a cheap holiday home in Spain as Spanish owners sell assets to send capital abroad.
Spain has a reputation for dirty tricks.
They used to love stealing land from Brits, building public facilities right up to the house curtilage and then levying a huge charge for the unwanted amenity blighting the home
No doubt the next trick will be to charge tens of thousands of euros to anyone who leaves a home unoccupied for more than 28 days.
Best leave the Spanish to fester in their own mess.