Finance

Will Europe Ban Cash?

500 eruos abandoned

The European Central Bank is developing specific plans for the 500 Euro cash notes withdrawal – the largest one in the Euro zone. According to Mario Draghi, the head of the ECB, the complying technical work is already underway. 500 Euros cash notes abandonement is the first step towards tightening monetary policy in Europe.

Eventually, this may result in a significant restriction or even ban of cash that is viewed to be an attack on economic freedom by many Europeans. In their view, Orwell’s prophecy about total control comes true, and electronic surveillance of the consumer wallet is becoming a reality.

The Reasoning Behind the Cash Prohibition Lobby

An active campaign has been recently launched in Europe by cash opponents (who’s that? – interrogation, probably). They argue that cash restriction helps to combat corruption, and money-laundering, and terrorism financing. According to German experts, each year more than 100 billion Euros are “washed off” in Germany. Primarily, those accont for the illegal proceeds from drug trafficking and prostitution, as well as the corruption and shady business payments. Cash, they note, is more convenient to pay for real estate, art and antiques, as well as gold and jewels. At the same time those 500 euros are the most popular among the law violators.

Some financiers, such as the co-chairman of the Board of Deutsche Bank, John Cryan believe that cash is a carryover as its keeping is becoming more expensive and inefficient. In addition, money notes are vector of disease-causing bacteria. According to Cryan, cash will go into the past in 10 years. Skandinavian governments and banks share his views and are rapidly introducing electronic payment system within the concept of “cashless society”. In the Scandinavian countries (famous for social experiments zone), cash payments currently occupy less than 6% of all payments.

Voices Against Restrictive Measures

In other European countries, similar plans to limit and ban cash payments encounter protests from consumers and a number of prominent financiers. They recognize it as an attack on the economic freedom.

Carl-Ludwig Thiele, a member of the Board of Deutsche Bundesbank, doubts that the restriction of cash payments will help to deal effectively with crime and terrorism: as terrorists are no longer running around with bags full of money, they have established their own cash payments system.

Jens Weidmann, Deutsche Bundesbank President, is also skeptical in regards to the plans of large denominations rejection and cash payments limit. He is confident that the criminals and schemers will find a way around these restrictions. Experts specify that in some countries it is meaningless to impose restrictions, because criminals operate internationally. Furthermoree, new forms of cryptocurrencies appear, such as Bitcoins. It is also well known that, in spite of large restrictions on non-cash payments, Spain and Italy have higher corruption level than that of Austria or Germany.

Additionally, cash payments restrictions trouble consumers greatly. Federation of German Consumer Organisations (VZBY) believes that cash abandonment will mean a totalitarian control over the citizens. State banks and firms will know everything on who bought when, what, including the price. Now, in times of great electronic surveillance of citizens, there is no better means to protect individual freedom than cash.

The Restrictions Currently Adopted in Europe

Cash limitation policies were first introduced by the countries of South Europe – Italy, Spain and adjoining France. These countries have already adopted very strict limits. Thus, in 2014, Italy set the maximum amount of the payment in cash to 3 thousand Euros (before – 1 thousand Euros), France – 3 thousand Euros for tax residents and 15 thousand for foreigners (since last year end – 1000 Euros for residents 10 thousand Euros for foreigners), Spain – 2.5 thousand Euros for residents and 15 thousand for foreigners.

Germany had no cash payments restrictions before, just as the United Kingdom and Netherlands. It became known, however, that the German government (SDP’s initiative) is pressing for the introduction of limiting cash payments to 5 thousand Euros Europe-wide. That became the red flag for the economic freedom proponents in Germany. They recognize here a closure of interests of State apparatus, the European bureaucracy and the financial lobby. As a result, officials and banks can receive complete control over consumers.

The Germans are even more attached to the “physical” money compared to other Europeans. If Swedish or Danish consumers are actively switching to electronic payments, Germans still prefer to pay in cash: According to Deutsche Bundesbank, 79% of all transactions in 2014 was carried out using cash, including 53% of the retail trade. German trade unions leaders believe that customers are those who have to determine the future of the cash payments. When the German Ministry of Finance got to know that view, they hastened to declare that the cash will continue to be used in the future.

Austrian citizen, being highly attached to notes and coins, experience special  antagonism to plans of cash limitations. Three-quarters of all transactions there are performed in cash and 92% of Austrians consider it to be more convenient and user-friendly compared to other payment methods.

Austrian ruling parties claim that a sharp restriction of personal freedoms and total surveillance is a dangerous trend, they are confident that private savings should not be subject to control. Nevertheless, the Central Bank, headed by Italian Mario Draghi, will apparently continue its restrictive monetary policy despite the resistance of Austria and the German Bundesbank.

An intriguing trend is observed in Switzerland: the cash turnover is markedly increasing here, and the notes of 1000 Franks are especially popular. According to the Swiss National Bank, the number of money notes in circulation has alsmost doubled over the past 5 years – from 22 to 43 million banknotes. The main reason is a banking hostile policy towards depositors, they have practically abolished paying interest, and have even introduced a negative interest rate on deposits. The Swiss do not trust banks and prefer to keep their money in notes of 1000 value.
Experts believe it to be a sign of an impending financial crisis. Consistent love people reveal to cash annoys banks and governments a lot. Sure, they want to put all the payments under control. But there is a German proverb: Nur Bares ist wahres! (only money in notes is the real money!)

Banks VS Customers

keeping money in bank is dangerousCash abolishment is essential for banks to be able to introduce a bail in – forced freezing or expropriation of customers deposits. This robbery technique was partially tested during the banking crisis in Cyprus. As a result, clients are unable to withdraw cash from the bank. In addition, the banks are introducing a negative interest on deposits, which makes it all meaningless.

Europeans indignation is growing: in their view, the 500 Euros notes abolition and the cash payments limit introduction make only a first step towards of the banks dictatorship establishment and the total financial surveillance. Ordinary citizens will be equated with criminals, terrorists and delinquents, all of their consumer habits and preferences will be electronically monitored. Cash abolition also means that citizens will be forced to open accounts in banks even against their will.

The German-speaking Internet forums are full with comments that the main financial discipline violators are not citizens, but the banks themselves and the government, and they are now laying their own problems at people’s door.

Consumers and businesses point the benefits of using cash: payment is remained anonymous and doesn’t produce control risk for the contracting parties. Money notes and coins are a reliable means of savings – taking into account the doubtfulness of many banks. That is even more true as this year has shown, when the Euro zone has introduced the bail in mechanism, allowing customer deposits expropriation in aid of saving their bank.

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