Spain's bank balance starts heading in the right direction

Some good news from Europe.

This chart, from JP Morgan via FT Alphaville's David Keohane, is quietly rather good news:


TARGET2 (Trans-European Automated Real-Time Gross Settlement System – yes, it's not a particularly good acronym) is the European inter-bank lending system, used for settling cross-border transactions throughout the eurozone.

If a Spanish supermarket buys beer from a German brewer and pays with a bank transfer, then the euros aren't just sent directly from one account to the other. Instead, they are channeled through the countries' central banks. The German brewer gets money from their bank, which gets the money from the Bundesbank, while the Spanish supermarket owes money to their local bank, which owes money to the Banco de España. The two central banks then settle those debts with the ECB, and that's the where TARGET2 comes in. Over the long-term, these debts and credits don't always even out, and so countries end up with balances with the ECB.

The chart above shows that the long-running trend for Germany to have ever-increasing credit, and Spain ever-increasing debt, may now be reversing. This is a good thing, because one of the few silver-linings of the crippling austerity the Spanish people have experienced over the last year is that the so-called "internal devaluation" – the reduction of wages in the country – is supposed to increase the strength of exports.

The TARGET2 trend also indicates that fears of a Spanish bank run are unfounded. While it doesn't leave the country in the all-clear – if people are taking money from banks in cash, it wouldn't show up on this account – it bodes well for the health of the banking sector.

But the most important aspect of TARGET2 for the eurocrisis as a whole is that it provides a mechanism for mechanical exit of the euro. We wrote about this in May with regards to Greece, but the short version is that if the debt gets too big, the ECB can decide to simply stop lending to the country. If that happens, the state is all but ejected from the euro in a stroke.

Greece may not be out of the water yet, but the knowledge that Spain is, for the time being, perfectly safe in the eurozone will help the country get its bearing. It still leaves Rajoy with the tough decision as to whether or not to officially request a bailout, but his hand is no longer as forced as it was.

Symbolic. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Jeremy Corbyn challenged by Labour MPs to sack Ken Livingstone from defence review

Former mayor of London criticised at PLP meeting over comments on 7 July bombings. 

After Jeremy Corbyn's decision to give Labour MPs a free vote over air strikes in Syria, tonight's Parliamentary Labour Party (PLP) meeting was less fractious than it could have been. But one grandee was still moved to declare that the "ferocity" of the attacks on the leader made it the most "uplifting" he had attended.

Margaret Beckett, the former foreign secretary, told the meeting: "We cannot unite the party if the leader's office is determined to divide us." Several MPs said afterwards that many of those who shared Corbyn's opposition to air strikes believed he had mishandled the process by appealing to MPs over the heads of the shadow cabinet and then to members. David Winnick declared that those who favoured military action faced a "shakedown" and deselection by Momentum activists. "It is completely unacceptable. They are a party within a party," he said of the Corbyn-aligned group. The "huge applause" for Hilary Benn, who favours intervention, far outweighed that for the leader, I'm told. 

There was also loud agreement when Jack Dromey condemned Ken Livingstone for blaming Tony Blair's invasion of Iraq for the 7 July 2005 bombings. Along with Angela Smith MP, Dromey demanded that Livingstone be sacked as the co-chair of Labour's defence review. Significantly, Benn said aftewards that he agreed with every word Dromey had said. Corbyn's office has previously said that it is up to the NEC, not the leader, whether the former London mayor holds the position. In reference to 7 July, an aide repeated Corbyn's statement that he preferred to "remember the brilliant words Ken used after 7/7". 

As on previous occasions, MPs complained that the leader failed to answer the questions that were put to him. A shadow minister told me that he "dodged" one on whether he believed the UK should end air strikes against Isis in Iraq. In reference to Syria, a Corbyn aide said afterwards that "There was significant support for the leader. There was a wide debate, with people speaking on both sides of the arguments." After David Cameron's decision to call a vote on air strikes for Wednesday, leaving only a day for debate, the number of Labour MPs backing intervention is likely to fall. One shadow minister told me that as few as 40-50 may back the government, though most expect the total to be closer to the original figure of 99. 

At the end of another remarkable day in Labour's history, a Corbyn aide concluded: "It was always going to be a bumpy ride when you have a leader who was elected by a large number outside parliament but whose support in the PLP is quite limited. There are a small number who find it hard to come to terms with that result."

George Eaton is political editor of the New Statesman.