It’s all but official. The €500 note is on the currency equivalent of death row. European Central Bank governor Mario Draghi refused to commute the note’s sentence yesterday. Draghi spoke in front on the Imperial Senate in Brussels and told apparatchiks that there is “increasing conviction in world public opinion” that the €500 note is the “currency of choice” for criminals, drug dealers and terrorists.
The former Goldman Sachs man has always been a man of the people. If anyone has the pulse of the public, it’s Draghi. When he tells you what the public thinks, it must be what the public thinks. It’s certainly what the power brokers in the European Union think.
French finance minister Michel Sapin spoke for France. He said the €500 note is “used more to conceal activities than to buy things, more used to facilitate dishonest activities than by people like you and me to get a bite to eat.” I suppose that depends on who you are and where you’re eating. But you see his point.
The Germans and the Luxembourgers are the only cash holdouts left on the Continent. As I reported last week via my German-speaking colleague Nickolai Hubble, the Germans have a tradition of using cash. It’s a country with a cultural memory of hyperinflation. Over 10,000 Germans responded to an ad in the country’s largest circulation newspaper and told finance minister Wolfgang Schäuble to keep his finely manicured hands off their cash.
By the way, a similar petition started by Capital & Conflict’s Nick O’Connor needs 3,336 more signatures to trigger a response from the British government. You can sign it here. If you’ve already signed it, send it to someone else and get them to sign it. Let’s at least get them on record about whether they want your cash or not.
Why are the Luxembourgers holding out? Europol statistics show that Luxembourg printed €87.5 worth of notes in 2013. That may not seem like a lot. But it’s twice the country’s GDP. It’s a lot of cash for a tiny little country. And as the Financial Times points out, the €500 note makes up a third of the value of all the euro notes in circulation in the eurozone.
Is it possible that ordinary people – crushed by high rates of regulation and taxation in Europe – see the €500 note as the easiest way to get money out of the official financial system? Is it possible that the authorities know this? Why yes. All things are possible.
But don’t weep for the €500 note. It is merely going where all paper currencies eventually go. To its death.
It’s death may be premature. And it’s a bit like regicide, killing off such a high-value and prestigious bank note. If you’re the €200 note though, how would you be feeling this morning? The king is dead! Long live the king!
Category: Economics