The European Central Bank has decided to stop producing €500 notes, in a move it depicts as a crackdown on crime but which critics in German-speaking countries say is part of an onslaught on cash and savings.
Top eurozone officials argue that the €500 bill, the euro’s highest denomination note, is the banknote of choice for the darkest parts of the black economy, because it allows drug dealers and terrorists to carry large amounts of cash.
Although the bill accounts for just 2.3 per cent of banknotes in the single currency area, it represents almost 30 per cent of their value.
As well as ending production, the ECB said on Wednesday it had decided to stop issuing the €500 around the end of 2018, “taking into account concerns that this banknote could facilitate illicit activities”. It added that “in view of the international role of the euro and the widespread trust in its banknotes, the €500 will remain legal tender and . . . will always retain its value”.
But its decision to scrap the printing plates for the note, which has not been produced since 2014, is likely to anger public opinion in Germany, a country where banknotes are viewed as a symbol of personal freedom, and Austria.
Both countries are culturally attached to cash in ways that distinguish them from other eurozone members, and much of German public opinion is already at odds with the ECB over the central bank’s ultra-low interest rates.
Leading politicians in Berlin have claimed the ECB is expropriating German savings and fuelling the rise of rightwing nationalism.
Until now banknote makers in Austria and Germany have produced the €500 note, along with note manufacturers in Luxembourg.
By making it more difficult to keep very large sums in cash, the abolition of the note could push otherwise reluctant people to put their savings in banks, raising fears that negative interest rates could eat into the principal.
To date such rates, which are imposed on commercial banks’ accounts at the ECB itself, have not directly applied to ordinary savers in the eurozone.
While ECB president Mario Draghi, who has already come under considerable criticism in Germany, pushed for the decision to scrap the €500 bill, the move has come under fire from other members of the governing council.
Ewald Nowotny, the governor of the National Bank of Austria, has claimed that the central bank risks “running into a general debate about abolishing cash”.
“My personal view is that we shouldn’t aim for phasing out the €500 bill,” he said last week.
Jens Weidmann, Bundesbank president, has said it would be “fatal if citizens got the impression that they are dispossessed of cash”.
Despite the ECB’s strong insistence to the contrary, some critics have accused the bank of seeking to abolish banknotes altogether.
The bank is adamant that all of the other denominations of its banknotes, which range from €5 to €200, will continue to be produced.
German public opinion has also been rocked by Berlin’s plans to limit the size of cash payments, an intended anti-terrorist move in the wake of the attacks in Paris and Brussels.
Bild, Germany’s highest circulation newspaper, recently contained a letter for readers to send to finance minister Wolfgang Schäuble in protest at his plans to limit cash purchases to €5,000, saying cash meant “independence from banks, technology and fees”.