Cash is king no more in Germany as cards gain ground
Cash is king no more in Germany as cards gain ground
The Bundesbank has been a staunch advocate of cash in the face of a global shift to electronic forms of payment such as debit cards and an international debate about the idea of digital-only money issued by central banks.
But a survey of about 2,000 people by the German central bank showed debit and credit cards were gradually gaining ground in the country, even if cash remained the country’s favorite form of payment.
“Cash remains the most popular, but card payments are increasing,” Bundesbank board member Carl-Ludwig Thiele said.
Cash accounted for 47.6 percent of German transactions by volume last year, down from 53.2 percent three years earlier and below the half mark for the first time since polling started in 2008, the survey showed.
Cards grabbed a 39.4 percent market share last year compared to 33.4 percent in 2014, mirroring a global trend that has long taken hold in many other countries including Sweden and Britain.
Internet payments also grew but still accounted for a modest 3.7 percent of total volume.
Germans and Austrians are the biggest users of cash among countries in the euro zone’s richer “core,” according to a recent study by the European Central Bank (ECB).
This preference has been associated with worries about privacy and a deeply ingrained diffidence toward the state, which some trace to the era of the Nazis and of communist East Germany.
The Bundesbank survey found most Germans thought that cash was useful to teach children about the use of money and to ensure a better control of one’s personal finances.
The vast majority also believed the abolition of notes and coins would cause problems to parts of the population, such as the elderly, while only just over a third saw it as a way to fight tax evasion and money laundering.
Speaking at the same conference, the Bundesbank’s president Jens Weidmann said getting rid of cash or replacing it with digital money issued by central banks would be the “wrong response” to the challenges faced by central banks at times of low inflation.
The idea of a digital currency giving holders a direct claim on the central bank is under study by Sweden’s Riksbank and has been touted by some academics as a way to extend the reach of monetary policy when interest rates on deposits are below zero.
But Weidmann rejected it and defended the use of cash and means of payments that go through commercial banks.
“(Getting rid of cash) would be the wrong, completely disproportionate response to the policy challenges of the zero lower bound,” he said.
“The same goes, obviously, for the introduction of digital central bank money with the aim of crowing out cash and enforcing negative rates across the board.”
He echoed the ECB’s view that giving depositors an option to hold money directly at the central bank would worsen bank runs at times of trouble. Weidmann added that it was up to central banks to promote more efficient payment systems that would quash the appetite for private digital tokens such as Bitcoin.
A German government plan to push for an upper limit of €5,000 to cash payments met fierce resistance two years ago, including by the country’s own central bank.
And the Bundesbank mounted a lonely opposition around the same time to the ECB’s move to retire the €500 note, its highest denomination, due to suspicions it was used by criminals. Thiele said on Wednesday he still hoped the purple bill would make a comeback when a new series of euro banknotes is unveiled.
German economy defies trade gloom with strong growth
- Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period
- Economists had forecast a 0.4 percent increase this time
BERLIN: The German economy accelerated in the second quarter despite the US move to impose new tariffs on Europe, official data showed Tuesday, performing slightly better than economists had expected.
Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period. That is up from 0.4 percent in the first quarter — a figure that was revised upward Tuesday from the initial reading of 0.3 percent given in May. Economists had forecast a 0.4 percent increase this time.
Its performance in the April-June period was helped by higher private and government spending and by increased investment in equipment and construction, the Federal Statistical Office said. Rising exports were outpaced by increasing imports.
The figure underlined the German economy’s continuing robust performance, with business confidence high and unemployment low despite some disappointing data on factory orders this year and concern about global trade tensions.
It has now grown for 34 of the past 37 quarters, said Carsten Brzeski, an economist at ING in Frankfurt, but he cautioned that “the challenges facing the German economy will increase rather than decrease.”
Those include the specter of a possible escalation of trade tensions, despite a recent deal to defuse a US-European Union dispute, geopolitical risks such as that posed by events in Turkey and a shortfall in investment and structural reforms at home, he said.
In year-on-year terms, the economy expanded by 2.3 percent in the second quarter.