The European Central Bank will stop issuing €500 bank notes towards the end of 2018 on concerns it could facilitate illicit activities but outstanding bills will remain in use indefinitely, the ECB said in a statement yesterday.
“The €500 note will remain legal tender and can therefore continue to be used as a means of payment and store of value,” the bank said.
“The €500 banknote, like the other denominations of euro banknotes, will always retain its value and can be exchanged at the national central banks of the Eurosystem for an unlimited period of time.”
The ECB under Mario Draghi has been looking to get rid of the €500 note due to concerns that it is also used by criminals and militants to finance their activities. It is said a €1 million bundle of the notes weighs only about 2kg, a weight easily transportable across borders.
The number of €500 notes issued across the euro zone has been declining since 2005, when €190 million worth of €500 notes were issued. Last year, €85 million worth of €500 notes were issued. The Central Bank never printed the notes in Ireland.
German pressure
While Mr Draghi, who has already come under considerable criticism in Germany, pushed for the decision to scrap the €500 bill, the move has come under fire from other members of the ECB governing council.
Ewald Nowotny, the governor of the National Bank of Austria, has claimed that the central bank risks “running into a general debate about abolishing cash”.
“My personal view is that we shouldn’t aim for phasing out the €500 bill,” he said last week.
Jens Weidmann, Germany’s Bundesbank president, has said it would be “fatal if citizens got the impression that they are dispossessed of cash”.
Despite the ECB’s strong insistence to the contrary, some critics have accused the bank of seeking to abolish banknotes altogether.
The bank is adamant that all of the other denominations of its banknotes, which range from €5 to €200, will continue to be produced.
German public opinion has also been rocked by Berlin’s plans to limit the size of cash payments, an intended anti-terrorist move in the wake of the attacks in Paris and Brussels.
Bild, Germany’s highest circulation newspaper, recently contained a letter for readers to send to finance minister Wolfgang Schäuble in protest at his plans to limit cash purchases to €5,000, saying cash meant “independence from banks, technology and fees”.
