> I seriously doubt governments are lending to other governments and borrowing at the same time
TARGET2 balances are bilateral and cumulative [1]. But they aren’t really debts intended to be paid back, and more an EU payments system accounting side effect. (When Greece threatened exiting the Euro, calling these balances did come into question [2].)
To me, TARGET2 is a politically acceptable way for rich euro countries (Germany) to transfer money to the poor ones (Greece), in exchange for the poor ones accepting the fact that the rich countries deciding EU policies.
TARGET2 balances are bilateral and cumulative [1]. But they aren’t really debts intended to be paid back, and more an EU payments system accounting side effect. (When Greece threatened exiting the Euro, calling these balances did come into question [2].)
[1] https://www.yardeni.com/pub/target2.pdf
[2] https://www.euromoney.com/article/b12kjh8s0kpncx/target2-pay...