The interesting aspect of Italy's new record Target2 Imbalance is that it comes just as Dwindling Trust in Italian Banks is on the rise.

Just 16 percent of Italians have confidence in the country’s lenders, down from an already meager 17 percent in June, according to a poll by the SWG research group of Trieste on Friday. Only 24 percent trust the Bank of Italy, plunging from 36 percent in June.

One likely reason: a tortuous bank crisis that caused losses for savers and led the government to rescue three lenders with taxpayers’ money this year. The vanishing confidence is likely to show in campaigns for national elections expected by next spring.

Supporters of the populist Five Star Movement and anti-migrant Northern League have the least confidence in lenders and the Bank of Italy among those with a definite opinion, according to the survey of 1,000 adults conducted Oct. 23-25.

Confidence in Banks Plunges

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The eurosceptic Five Star Movement just happens to have the largest share of the vote in recent polls.

Target2 Discussion

Target2 stands for Trans-European Automated Real-time Gross Settlement System. It is a reflection of capital flight from the “Club-Med” countries in Southern Europe (Greece, Spain, and Italy) to banks in Northern Europe.

Pater Tenebrarum at the Acting Man blog provides this easy to understand example: “Spain imports German goods, but no Spanish goods or capital have been acquired by any private party in Germany in return. The only thing that has been ‘acquired’ is an IOU issued by the Spanish commercial bank to the Bank of Spain in return for funding the payment.

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This is not the same as an auto loan from a dealer or a bank. In the case of Target2, central banks are guaranteeing the IOU.

Target2 also encompasses people yanking deposits from a bank in their country and parking them in a bank in another country. Greece is a nice example, and the result was capital controls.

If Italy or Greece (any country) were to leave the Eurozone and default on the target2 balance, the rest of the countries would have to make up the default according to their percentage weight in the Eurozone.

Another Look at Capital Flight

It is no coincidence that Target2 imbalances are on the rise as faith in banks collapses. Target2 is a measure of capital flight despite the ECB's assurances to the contrary.

For further discussion, please see Another Look at Capital Flight in Italy and Spain: ECB’s Target2 Explanation is False.

Mike "Mish" Shedlock

Fuse is Lit! Target2 Imbalances Hit Crisis Levels: An Email Exchange With the ECB Over Target2

Eurozone Target2 imbalances have touched or exceeded the crisis levels hit in 2012 when Greece was on the verge of leaving the Eurozone. Others have noted the growing imbalances as well.

Capital Flight in Italy, Spain Intensifies: Italy Target2 Balance Hits Record Negative

The ECB statistical data warehouse released Target2 Balance figures today. The numbers are reflective of intensifying capital flight in Italy and Spain.

Another Look at Capital Flight in Italy and Spain: ECB’s Target2 Explanation is False

The ECB claims that Target2 does not represent capital flight. Evidence says the ECB is wrong, especially for Italy and Spain.

BIS Blames ECB for Rising Target2 Imbalances: Fear of Default

In the latest BIS Quarterly Review, the BIS points a finger at the ECB for rising Target2 imbalances.

Target2 Imbalances Grow: ECB Overtakes Greece as Third Largest Debtor

Target2 imbalances in the eurozone continue to mount. The ECB itself now has the third largest negative balance following Italy and Spain.

Debate Over Target2 Continues: Twilight of the Euro

The Target2 debate continues. Eurointelligence Promotes Still More Silliness.

Discussion of Target2 and the ELA (Emergency Liquidity Assistance) program; Reader From Europe Asks

“Can You Please Explain Target2?”. Reader Thomas who lives in the Netherlands writes …

Eurozone Capital Flight Intensifies: Target2 Imbalances Widen Again

A quick perusal of Target2 Balances for January shows capital flight from Italy and Spain to Germany intensified again.

Eurointelligence Displays Stunning Ignorance Regarding Target2

On two recent days, Eurointellence made stunningly bad comments about the escalating capital flight from Italy.