Cash discussed at symposium

Cash in circulation has more than quadrupled since euro currency was introduced; it now stands at more than €1 trillion. Banknotes and coins are still popular payment media, and this popularity is not confined to the euro area or Germans, who have a particular proclivity for cash. In fact, an international study comparing payment habits in Australia, Austria, Canada, France, Germany, the Netherlands and the United States has shown that customers in all these countries frequently pay cash at the checkout counter. "In terms of the number of transactions, cash accounts for more than 50 per cent everywhere except the United States," said Carl-Ludwig Thiele, the Deutsche Bundesbank Executive Board member responsible for cash management, at the Deutsche Bundesbank's third cash symposium. He added that cash usage was even slightly higher in Austria than in Germany.

The symbolic value of cash

There are many reasons for the popularity of cash. Cash is perceived as a simple, safe and quick medium of payment. Moreover, it helps to control spending and plan a budget. Cash can be used to pay anonymously and directly for goods or services without the seller or buyer of a good having to deliver upfront. It can be used to make payments without the need for a technical infrastructure, thus ensuring the smooth functioning of payment transactions in emergencies and crisis situations. Alongside these numerous technical features, cash also has an emotional value. "Confidence in a currency has its roots in cash," Bundesbank President Jens Weidmann said at the symposium. "That is perhaps even more true for the euro than it is for other currencies since euro cash - the common means of payment we use throughout the euro area - is the most manifest symbol of European integration," he reasoned.

Restrictions on cash under discussion

Despite its underlying popularity, restrictions on cash payments or even the abolition of cash altogether have been a topic of public debate, fuelled by the announcement to abolish the €500 banknote as well as an idea being floated by the Federal Government to impose a ceiling on cash payments of €5,000. Levin Holle, Head of the Financial Markets Division at the Federal Ministry of Finance, assured the audience that this initiative by the Federal Government does not in any way represent the abolition of money; however, he added that the police and customs authorities had provided "very clear indications of the risks" of cash, such as terrorist financing and money laundering. Holle noted that it was precisely the anonymity of cash payments which fostered the conditions for abuse. Policymakers therefore faced a trade-off between individual freedom and the general protection of public safety, with a single European solution being preferable to a national one, Holle said. Restrictions on cash payments are currently in place in 12 of the 28 EU member states.

Hans-Jürgen Papier, a former president of the Federal Constitutional Court, voiced misgivings about the legality of a ceiling on cash purchases, believing that it would violate several fundamental rights, including freedom of contract and freedom of ownership. "Legislators will need to come up with legitimate reasons relating to the public interest in order to justify imposing a limit," Papier said. He saw no evidence of that at present, but more of a "superficial hope" that a ceiling on cash purchases could help fight crime, which he held was not adequate. Klaus Müller of the Federation of German Consumer Organisations likewise voiced criticism, noting that "this denies [the consumer] freedom of choice of payment means."

The conversation continues

In his remarks, Stefan Hardt, Head of the Directorate General Cash Management at the Bundesbank, went into particular detail on the topic of coins. He noted that the banknote cycle in Germany was very secure and efficient, but that the same could not always be said of coins. "I believe that, not least owing to regulatory requirements, some of which are European in origin, coin operations are not organised in a fully efficient manner," Hardt said, giving as an example the rules governing the coin packaging used for inpayments and outpayments at the Bundesbank. "I therefore wish to invite all stakeholders to a round table so that we can jointly thrash out ways of rectifying the existing imbalances in coin operations," Hardt said. He called on all parties to pitch in their ideas and proposals for solving the existing problems.