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Abstract
The Trans-European Automated Real-Time Gross settlement Express Transfer system (TARGET) imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in theory it is more of an exchange rate union or a system of fixed exchange rates than a monetary union. This paper will show why the TARGET is a crucial indicator for the Eurozone not being a monetary union but instead an exchange rate union, and why countries holding TARGET liabilities against the European System of Central Banks can be compared to a reserve currency country, like the US under the Bretton-Woods System.
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