The 500 euro note slowly fades into history
As reported by Russkaya Germaniya, the new 5, 10 and 20 euro notes are already in circulation, and the 50, 100 and 200 euro notes should also undergo a design update over the specified time and become more secure against counterfeiting. The cessation of printing new notes does not at all mean a ban on the use of old ones: the 500 euro banknote will remain legal tender throughout the Eurozone – at least for as long as the euro currency exists. The exchange period for '500s' will not be limited: even in 2025, the central banks of the now 19 Eurozone states will exchange them without limit.
Thus, in the life of an ordinary law-abiding citizen, the ECB's decision changes practically nothing: most Europeans have almost never held the largest eurozone banknote in their hands, and in Spain it was even nicknamed 'bin Laden', hinting that, like the deceased leader of Al-Qaeda, no one has ever seen it.
Earlier, the relevant ECB committee (the so-called Banknote Committee) estimated the cost of withdrawing the 500-euro note at no less than 500 million euros – depending on how quickly it would become history. The now-adopted decision to gradually and long-term withdraw the largest banknote from circulation relieves bankers of urgency and, likely, such significant expenses.
The very idea of withdrawing the largest banknote remains controversial. Central Bank President Mario Draghi defends the view that it is primarily used by criminals: it is a convenient tool for money laundering, tax evasion, financing illegal transactions and terrorism. Experts from the German Central Bank disagree with this view, but will have to bow to the decision of a higher body. Various studies on this topic are mostly outdated and do not cover all aspects of cash circulation.
The main argument of opponents of high-denomination cash circulation is that such banknotes, like any cash, leave no traces, and therefore large-denomination notes are extremely convenient for illegal transactions. Many economists, in turn, believe that European regulatory authorities in general know too little about the methods of settlement among organized crime to make such hasty conclusions as the need to withdraw large banknotes.
According to the International Monetary Fund, the volume of criminal transactions financed by cash increased by 80% from 1996 to 2009 and reaches two trillion US dollars, accounting for two to five percent of global gross domestic product. 2.2% of these transactions occur in Germany, which ranks 20th in the list of world leaders in illegal cash turnover – between Switzerland and the Bahamas.
The leaders of this dubious hit parade are the United States of America (18.9%), ahead of the Cayman Islands and Russia in the top three. Among Eurozone members, Italy tops the IMF's 'black list', accounting for 3.7% of global illegal cash turnover.
In Germany, the issue of withdrawing the 500-euro note is perceived especially painfully: unlike many countries, mainly northern European neighbors, the system of payment by plastic cards has not achieved widespread adoption in the country, and the free circulation of cash is perceived by the majority of the population as one of the manifestations of freedom and independence from all kinds of supervisory bodies. In Germany, there is a wide debate about whether the withdrawal of the '500' is the first swallow of a gradual transition to cashless payments. The European Central Bank is trying to reassure both Germans and all other skeptics: 'Anyone who thinks that the Eurozone will abandon cash is mistaken,' promises ECB Executive Board member Yves Mersch.
However, for those for whom cash symbolizes not only purchasing power but also bank-printed freedom, the officials' words are perceived as a signal to action. German bankers expect that citizens will start looking for various ways to get rid of large banknotes.
'It would be fatal if the withdrawal of the 500-euro note and the discussion about introducing an upper limit for cash transactions create the impression that the Eurozone is taking steps to restrict cash circulation,' emphasizes President of the German Central Bank Jens Weidmann. 'We want to give citizens the opportunity to pay as they wish.'