In the saga of the euro crisis there is a term that crops up every now and then: TARGET2. It seems to be an ethereal term for some technicality of use only to economists and government financial managers. But in fact it is a ticking time bomb under our economy.
TARGET2 (short for Trans-European Automated Real-time Gross Settlement Express Transfer System 2) was originally devised as a kind of clearing house for cross-border transfers of money between banks in the EUnion. Wikipedia gives the following example:
A Greek importer, for example, might place an order with a German company. Payments to and from the accounts of the buyer and seller are channeled via central banks, so the German exporter’s bank gets a credit with the Bundesbank, which in turn has a claim on the ECB. The Greek importer’s bank owes its local central bank, leaving the Bank of Greece with a debit at the ECB.
As such one would expect the balance for each country to even out over a long period. And such was more or less the case until the summer of 2010.
But from the summer of 2010 onwards something started to happen. The central banks PIIGS started to refuse honouring their obligations, in essence taking an overdraft. The other countries, notably the AAA countries such as the Netherlands and Germany, on the other hand kept up their payments into TARGET2, building up a positive balance sheet, transferring money into TARGET2. Money that in turn was used to allow the PIIGS to extend their overdrafts even further.
As of this writing, we have Greece showing an overdraft of 104 billion. The Irish owe 100 billion, but to their credit they seem to be cleaning up their act, coming down from an overdraft of about 140 billion in the end of 2010. The biggest financial debauchery is perpetrated by Italy, which refuses to clear a cool 279 billion euros. And honourable second place is for Spain, running a tab of 252 billion.
On the other side, the Germans have a positive TARGET2 balance of a gargantuan 644 billion euros. The Netherlands is in for an equally eye-watering 155 billion. To put that in context: That amounts to roughly ONE QUARTER (24%) of Dutch GDP (640 billion). Of every 4 euros earned in the Netherlands yearly, one is now residing on the Dutch balance sheet in TARGET2.
In essence then, what we have here is a underhanded way to supply bail-out money to debt stricken countries without having to go to national parliaments for permission, by-passing democratic control. Notionally, this money is on loan, and would, all things being normal, be paid back. But things are, you will all agree, far from normal. What this means for us Lowlanders then is this: Minister Jan Kees de Jager, the DNBs Klaas Knot and whoever else have approved this insanity have hung us out to dry. On top of the official bail-outs and ESM guarantees, they have given over another 155 billion of free money to support the overdrafts of Italy, Spain and the other PIIGS.
Staying in the euro will be an unmitigated disaster. As it turns out, so will leaving the euro or a wholesale breakup of the eurozone. If any of the PIIGS leave, or are forced out of, the euro, their new national currency will devalue. Suppose on average that devaluation is 25% of parity value. In the case all of the euro breaks up, the Netherlands (and that does means us, lowly citizens) stand to lose around 116 BILLION, at the least. This is so beyond stupid, it is starting to look a lot like criminal negligence by those that purport to be stewards of our economy.
The real scandal in this is of course the total and complete silence of both parliament (supposed to control government on our behalf) and the MSM. Any way you look at it, this seems to be a case where Dutch government and financial authorities have inadvertently sabotaged the Dutch economy. And for what? Well, to bail out the EUnion, of course. It is a frantic attempt to keep the EUnion together in the midst of its complete and utter failure. It is scorched earth tactics. Our own government has made sure that when the euro vanishes, the Dutch economy will be torn asunder, will burn to the ground. But those that have set themselves up to ‘represent’ us, to watch over government, silently go along, betraying the vows the swore and the promises they make.
Personally, I still think getting out of the euro and the EUnion is preferable above staying in. By now it is so true it has almost become cliché to note that the EUnion has not delivered on its promises. The Brussels monster is proving on a daily basis it is an impediment to economic recovery, free and unencumbered economic activity and yes, even to freedom itself. It is costing us (apart from the bail outs) vast amount amounts of money, for which we, the people, get precious little in return. If the aim is a country where the government is accountable to the people making up the citizenship, where truly the people rule, leaving the EUnion is a sine qua non, a necessary prerequisite.
It is actually shocking to see how Dutch authorities have used Dutch taxes to undermine the Dutch economy in this way. The extent of sabotage is breathtaking. When (not if) the euro zone breaks up, our own officials have made sure it will cost us very dearly. More dearly then it ever should have cost. In fact, they’ve made sure that if the euro burns to the ground, the Netherlands goes with it. It is the economic equivalent of the ultimate scorched earth set up. Isn’t there a law against this type of behaviour? Isn’t this naked treason?
[UPDATE001] Robert M. Wuner, author of Wolfsrudel greifen an (‘Wolf packs attack’) has gathered together an impressive dossier around TARGET2. Much of it is linking to German language source, but there’s a nice array of EN sources as well. The entire dossier can be found here.