FRANKFURT (Reuters) - Money created by the European Central Bank to shore up euro zone growth and inflation is piling up in Germany as investors are reluctant to venture outside the bloc's strongest economy, Bundesbank data showed on Monday.
A large amount of the money printed by the ECB to buy bonds is landing in German bank accounts, often held by foreign investors, and staying there.
This is pushing up the Bundesbank's net credit with the ECB's Target 2 system for settling cross-border payments in the euro zone, which rose to a record high of 814 billion euros (707.21 billion pounds) in February.
In the same month, Italy's Target 2 liabilities hit an all-time high of 386.1 billion euros, which the Bank of Italy blamed on factors including Italians investing their savings abroad and the ECB's bond purchases.
In its monthly report, the Bundesbank said this money does not then flow to other parts of the euro zone, even though bond yields tend to be there higher than in Germany.
That showed investors' reluctance to put their cash to work in weaker economies and raised questions about the effectiveness of the ECB's stimulus programme.
"It is remarkable ... that these second-round effects of the APP ... are not taking place in some countries, including Germany," the Bundesbank said in its monthly report.
The ECB declined to comment. Last year, the central bank said growing Target 2 imbalances simply reflected purchases of bonds by central banks from sellers located in different euro zone countries.
Before the euro zone debt crisis that peaked in 2012, money flowed out of Germany to seek higher returns in countries such as Greece, Spain or Italy.
That trend reversed after 2010 as the crisis escalated and confidence in debt-laden countries has yet to be re-established despite the ECB's efforts.
The German economy has continued to expand and will do so in the near future, the Bundesbank said in its report, citing very strong industrial output driven by high demand from within the EU's economic powerhouse and from abroad.
Target 2 claims and liabilities of the national central banks in the euro zone are not a problem as long as the currency union exists.
But if the euro zone should break up, debtors -- the national central banks of countries leaving the bloc -- would have to pay the money back.
Reporting by Andreas Framke; Editing by Catherine Evans