FRANKFURT Oct 4 Money flowed into Germany and
out of Italy and Spain in August, European Central bank data
showed on Tuesday, showing a gap between the euro zone's
strongest economy and the struggling periphery was wide open.
The ECB is buying 80 billion euros ($89.26 billion) worth of
bonds every month but data from the bloc's bank payment system
shows most of that money ends up in German banks and stays
The Target 2 data showed net payments made to German banks
from their peers in other euro zone countries exceeded flows in
the opposite directions by 17.2 billion euros in August.
Germany's net claims towards the rest of the bloc since 2008
stood at 677.5 billion euros.
The opposite was true in Italy and Spain, which saw their
net liabilities hit new three-year highs in August, when they
rose by 34.9 and 20.5 billion euros each to 326.9 and 313.6
billion euros respectively.
The ECB's chief economist, Peter Praet, said the recent
widening of Target 2 imbalances was due to the ECB buying 60
percent of its bonds from sellers in Germany, typically non-euro
zone institutions with an account there.
But the fact that the money was then not flowing back to
other parts of the euro zone, where bond yields tend to be
higher, showed investors, some six years after the sovereign
debt crisis broke out, were still relucant to put their money to
work in weaker economies
This is also exacerbating imbalances among euro zone banks.
German banks are sitting on a growing pile of excess cash,
which, due to the ECB's negative rate on deposits, is squeezing
their profits. At the same time, some lenders in weaker
countries still rely on central bank liquidity.
($1 = 0.8962 euros)
(Reporting By Francesco Canepa; Editing by Angus MacSwan)