Can cancelling the €500 bill make Europe safer?
Washington: If some European fiscal watchdogs have their way, a purple banknote adorned with images of modern architecture could become an endangered species.
Too valuable, too light: The €500 bill is the bane of law enforcement. Photo: Luis Martinez/Commons
For months, the European Central Bank has been casting a critical eye over the €500 bill. It’s not because the alpha bill of the euro family – currently worth about $750 – is unloved. Just the opposite. Regulators fear it’s too popular as a mainstay of the underground economy: a convenient vehicle for, say, untraceable cash transactions by terrorist cells or criminal gangs.
Things have only gotten worse for the bill’s outlaw image. The disclosures in the Panama Papers – tax havens, real estate deals in cash, offshore shell companies – have pushed calls for financial transparency to the top of the agenda in the West.
A giant banner, featuring the euro and promoting stronger European economic governance, is illuminated at the headquarters of the EU Berlaymont Building in Brussels. Photo: Bloomberg
In the spirit of the moment, some European regulators, advisers and security officials have redoubled appeals to consider phasing out the €500 bill, becoming the latest European heavyweight to face pressure from the Panama Papers fallout.
The attention on the €500 bill is more about presumed guilt by association. It is seen as a handy piece of paper to, ironically, avoid a financial paper trail. A stack of €1 million in €500 denominations weighs about two kilograms. A similar amount in €100 bills would weigh about five times as much.
That’s why some detractors say the bill is a perfect tool for off-the-grid cash transactions involving possible drug deals, weapons buys and plots by terrorist cells. The probes in the Paris and Brussels attacks have struggled to unravel the extremists’ financial web of apartment leases, car rentals and other purchases, often believed to have been done in cash.
There have been no clear findings to back up worries the €500 bill is the note of choice to fly under the radar.
The highest-value euro banknote. Photo: Frank Schwichtenberg/Commons
Still, the head of the European Union’s anti-fraud division, Giovanni Kessler, feels it’s better to err on the side of caution.
In January, he called for the €500 bill to be eased out of circulation.
“I wonder if there is still a need for high denomination bills, such as the €500 bill, especially bearing in mind that these can make the life of fraudsters much easier,” Mr Kessler said.
However, for the moment, it’s little more than talk by EU officials.
No proposals have been made on how the 19-nation eurozone can drop the €500 note, the second-largest bill in regular circulation after Switzerland’s 1000 franc banknote, currently worth about $1360. (The United States printed bills worth up to $US10,000 in the decades before World War II.)
Yet there are more recent examples of dumping high-denomination bills.
In 2000, Canada stopped printing its $C1000 bill, and Singapore did the same in 2014 with its $S10,000 note, then worth about $8850.