A serious revision of the role of cash is already underway
"It would be extremely unpleasant if the country's residents got the impression that they are gradually being deprived of cash," says Jens Weidmann, President of the German Federal Bank (Bundesbank), genuinely alarmed. "People should be able to decide for themselves whether they want to pay with cash or non-cash," he emphasizes in an interview published in Germany's most widely circulated newspaper, Bild. In doing so, he demonstratively positions himself in opposition to his own government.
According to Deutsche Welle, in early February Berlin proposed introducing a limit of 5,000 euros for cash payments. Ideally, this would apply across the entire European Union, but if that is not possible, then at least at the national level. A paradoxical situation arose: in Brussels, the European Commission reacted favorably to the idea, but in Germany itself it met with widespread rejection.
The keen interest from Brussels is largely due to the fact that the German government proposed a measure that has already been implemented in a number of other major EU countries. In France, for example, such a limit for tax residents was initially 3,000 euros and then reduced to 1,000 euros (for non-residents it is set at 10,000 euros). In Spain, cash usage is limited to 2,500 euros for locals and 15,000 euros for visitors. Italy has a uniform limit of 2,999.99 euros for everyone.
The arguments in favor of limiting cash are similar everywhere: banning the use of large sums of cash will help combat corruption, tax evasion, drug trafficking, and terrorism. Kai Bussmann, a professor of criminology at Martin Luther University Halle-Wittenberg, calculated that in Germany alone, various criminals launder around 100 billion euros annually. If they are deprived of the ability to purchase luxury items, cars, real estate, and any expensive goods with cash, it will seriously complicate their money laundering and their lives in general.
There is also an economic aspect. Banks have to spend several billion euros annually on storage, transport, and insurance of cash, reminds the Federal Association of German Banks (BdB). So the fewer cash payments, the lower the costs for the entire industry. Nevertheless, the BdB did not support the government-proposed limit on cash payments, stating that "the discussion about the future of cash should also take into account Germany's cultural traditions."
And those traditions are such that Germans like dealing with hard cash. According to the Bundesbank, in 2014 about 80 percent of all retail purchases were paid in cash. Non-cash payments are much less common in Germany than, for example, in the US or Scandinavian countries.
However, opponents of the government proposal are not only or even so much in favor of preserving national cultural traditions (which, after all, could be interpreted as backwardness or, say, resistance to new technologies), but rather for ensuring basic civil liberties and the right to protection of personal data.
"Any restriction on the use of cash means a loss of part of their individual economic freedom for the country's residents," says Bundesbank board member Karl-Ludwig Thiele. "The attempt to introduce large-scale restrictions on cash payments is a new fundamental attack on data protection and the personal sphere of citizens," warns Konstantin von Notz, a member of the Bundestag from the Green Party.
The liberal Free Democratic Party (FDP), which is currently not represented in the federal parliament, also strongly condemned the government's idea. Its chairman Christian Lindner is convinced: "Limiting the use of cash is a step towards total control and expropriation." The party's financial expert Volker Wissing elaborates: the government is striving not so much to cut off terrorist financing as to "gain control over citizens' savings."
Critics of the government proposal doubt that limits on cash payments are an effective means of fighting crime, citing Italy as an example, which in their view has not yet achieved much success in combating the mafia.
Even the automaker Daimler joined the discussion. Its CFO Bodo Uebber reported that in Germany, almost no one pays cash for new cars anymore. Cash continues to play a role only in the used car market.
A few days later, the German Finance Ministry responded to the flurry of criticism, saying through a spokesperson: "We have taken note of these statements." According to the official, the ministry sees its task as to spark a public debate on ways to combat money laundering and terrorist financing. Moreover, EU countries should agree on a common approach to this issue and unify existing limits.
Where this discussion will ultimately lead is unclear. According to the results of a quick poll commissioned by Focus magazine and published on February 5, 79 percent of Germans cannot imagine life without cash. Nevertheless, it is quite obvious that a serious revision of their role has already begun – both in Europe and even in Germany. Numerous facts testify to this trend.
This also includes the increasingly active refusal of cash in Denmark and Sweden. And the statement made on January 20 at the World Economic Forum in Davos by the Briton John Cryan, who currently heads the largest German bank Deutsche Bank: "Cash is terribly expensive and inefficient. In ten years it will disappear." And the plans of the European Central Bank (ECB) to stop issuing the largest euro banknote of 500 euros. And even the experiment that began on February 1 in the German town of Kleve to abandon the smallest euro coins of 1 and 2 cents.