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Eurozone capital imbalances: Target2 and potential currency break-up

Tuesday 19th June 2012

    Huw Pill, Chief European Economist at Goldman Sachs

    Eurozone capital imbalances: Target2 and potential currency break-up

    At 57 Tufton Street, London, SW1P 3QL – Tuesday 19th June, 2012 12.45pm for 1pm-2pm

    Huge capital flight from the Southern European states in recent years has led to an expansion of Target2 credits  - liabilities for Southern states to the ECB, and assets claims for the Bundesbank on the ECB. This is fine while the Eurozone remains together – but were Greece to leave there would presumably be a large devaluation in the new drachma currency which would hit the books of the ECB, with the loss to be shared amongst the remaining Eurozone countries. Germany would take a 28% share of this hit. What’s more, it would likely lead to accelerated capital flight from other Southern states.

    We are delighted to welcome Huw Pill, the Chief European Economist at Goldman Sachs and formerly of the ECB, who will kick off a roundtable discussion with some thoughts on this issue. In particular he will address:

    • How these have imbalances built up, and why the Germans are concerned
    • The ramifications of these imbalances under the scenario of a Greek euro exit
    • Potential ways in which any negative effects can be mitigated in the event of a euro break-up

    The event will then open out into an informal round-table discussion.

    We would be delighted if you were able to attend and add your expertise to the discussion. This is a topic which is gathering momentum in the print media across Europe, but there as yet appears little consensus on its implications.

    The lunch will take place under Chatham House Rule, but will be attended by policy makers, politicians and journalists specialising in economics and finance.

    Please RSVP to Ryan Bourne [email protected] or  0207 222 4488 if you wish to attend; and please also send any thoughts or observations that the Chair might like to consider.