Mixed emotions in Germany as €500 note bows out

The €500 bill accounted for just 2.3 percent of all euro notes in circulation last month. (Reuters)
Updated 27 January 2019
0

Mixed emotions in Germany as €500 note bows out

  • From Sunday, central banks in 17 of the 19 eurozone countries will stop issuing the violet-colored banknotes
  • The €500 bill accounted for just 2.3 percent of all euro notes in circulation last month

FRANKFURT AM MAIN: As the ECB takes the final step in phasing out the €500 note, few are expected to mourn a bill favored by criminals but rarely seen in daily life.
Except perhaps in cash-loving Germany.
From Sunday, central banks in 17 of the 19 eurozone countries will stop issuing the violet-colored banknotes.
Only the German and Austrian central banks are clinging on a while longer, until April 26, to “ensure a smooth transition,” the European Central Bank said in a statement.
Medical technician Rolf, from the German town of Marburg, said he found the demise of the single currency’s highest-denomination note “hard to accept.”
Standing a stone’s throw from Frankfurt’s blue-and-yellow euro sculpture after a meeting in the city, the 61-year-old said he had made a point of paying for his car in €500s.
“I prefer using cash for large payments, it doesn’t mean I’m involved in anything dodgy,” Rolf said, declining to give his last name.
The ECB decision to end the note’s issuance will lead to fewer and fewer circulating as commercial banks gradually return them to their countries’ central banks, where they will be replaced by lower-denomination bills.
But anyone hoarding €500s under their mattress needn’t worry, as all existing bills remain legal tender.
“They can continue to be used to spend or to save, and they will always retain their value,” said ECB spokeswoman Eva Taylor.
The €500 bill accounted for just 2.3 percent of all euro notes in circulation last month.
The banknote’s death warrant was signed in 2016 when the ECB formally ended its production over concerns it could “facilitate illegal activities” after research linked its use to money laundering, tax evasion and terrorism financing.
Sometimes dubbed the “Bin Laden,” the note has proved a compact way to transport illicit money.
A million euros in €500 notes weighs just 2.2 kilogram, fitting easily into a laptop bag.
The same sum in $100 bills, the US currency’s highest denomination, would weigh almost six times as much and require a much larger case.
While the plan to slowly kill off the €500 made few waves abroad, it sparked an emotional debate in Germany where many feared it was a prelude to abolishing cash altogether.
Among the fiercest opponents was Jens Weidmann, chief of Germany’s powerful Bundesbank central bank, who said scrapping the note would do little to combat crime but could “damage trust” in the single currency.
Critics also said the move would make it more difficult and expensive for banks to physically store large amounts of cash in order to bypass negative interest rates.
The ECB’s deposit rate currently stands at minus 0.4 percent, meaning banks pay to park excess funds with the Frankfurt institution.
When the euro was created two decades ago, Germany was keen to have a €500 bill as the closest equivalent to its cherished 1,000-Deutsche Mark banknote.
But even in Europe’s top economy, where privacy is prized and cash is king, the €500 isn’t any more widely used than in other countries, and won’t be universally missed.
Suzanne Spenner, a Frankfurt-based nanny in her mid-fifties, said in her experience the slightly oversized note — an awkward fit in most wallets — was a pain to get rid of.
“They wouldn’t take it in the shops. I have no need for it.”
A 2017 Bundesbank study found that over 60 percent of Germans have dealt with the €500 note at least once, often as a gift, a way of storing money or to pay for large purchases.
Across the euro region, the ECB said “more people than often thought use high denomination banknotes.”
In a major 2015-2016 ECB survey, almost 20 percent of eurozone respondents said they had handled a €200 or €500 bill in the preceding year.
Lucia Bassing, owner of a high-end store selling beds and mattresses in Frankfurt, said while card payments were on the rise, it wasn’t unusual for customers to pay for a €3,000 bed in €500s.
“I personally don’t like carrying a €500 note on me so I won’t miss it,” said the 49-year-old.
“But I’m always happy to accept them from customers,” she laughed.


Hong Kong economy stalls amid US-China trade dispute: finance chief

Updated 17 February 2019
0

Hong Kong economy stalls amid US-China trade dispute: finance chief

  • ‘The impact of China-US trade frictions on Hong Kong’s exports has clearly emerged at the end of last year’
  • Economic growth in the semi-autonomous Chinese city for the last quarter of 2018 was less than 1.5 percent

HONG KONG: Hong Kong’s economy stalled last year as the ongoing China-US trade dispute and retail woes dragged down local business, the city’s financial chief said Sunday.
Beijing and Washington have already imposed duties on more than $360 billion in two-way trade, roiling global financial markets and weighing heavily on manufacturing output in both countries.
“The impact of China-US trade frictions on Hong Kong’s exports has clearly emerged at the end of last year,” said finance secretary Paul Chan.
Economic growth in the semi-autonomous Chinese city for the last quarter of 2018 was less than 1.5 percent — the weakest since the first quarter of 2016 and a “significant slowdown” from the average growth rate of 3.7 percent in the first three quarters, Chan wrote on his official blog.
The slowdown brought last year’s growth rate to an estimated three percent, down from the higher-than-forecast 3.8 percent recorded in 2017, he added.
“It was almost ‘zero-growth’ for commodities exports in the fourth quarter, which was a sharp drop compared to the average 6 percent growth in the first three quarters,” he wrote.
Chan said consumer sentiment had also dampened with retail sales rising only 2.1 percent year-on-year in the fourth quarter, a far cry from the more than 12 percent increase in the first half of the year.
“The external political and economic situation remains unclear ... Therefore, we repeatedly stress the need to support enterprises, safeguard employment, stabilize the economy and benefit people’s livelihoods,” he wrote, hinting at the ongoing trade negotiations between the world’s top two economies.
Chan is expected to deliver the Hong Kong budget on February 27.