Italy and the capital leakage. Italy is facing a huge capital leakage from July 2014 on: we are talking about 79 Billion Euros. Let’s see why in this article.
Target 2 is a system of compensation of the payments among commercial banks and the relative central banks of the Euro countries, with the final supervision of the European Central Bank (ECB).
Starting from July 2014 the balance of Italy on Target 2 is getting worse, and when I say “worse” I’m talking about 80 billion Euros! Why? Because the Bank of Italy has increased its bank account on the Euro system. Italian commercial banks use the Bank of Italy’s money to pay their private external debt, to compensate the capital leakage of foreigner investors.
Looking back on September 2012 it is possible to notice a significant improvement on the Italian balance, due to the creation of the Outright Monetary Transations (OMT), announced by Mario Draghi, ECB President, on August 2012. This plan is commonly known as “anti spread plan” and has been created to overcome the crise in the Euro zone countries.
At the moment the legitimacy of this plan in under discussion, in case it will be considered illegal the consequences will be huge and will modify the actions the ECB can take in occasion of the next meeting of January 22nd.