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”.
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, pushed for the decision to scrap the ￠500 bill, the move has come under fire from other members of the governing council.
The bank is adamant that all of the other denominations of its banknotes, which range from ￠5 to ￠200, will continue to be produced.