Geographies in Depth

Why is the Eurozone considering ditching the €500 note?

A teller counts euro banknotes inside a National Bank of Greece branch in Athens February 10, 2010. Euro zone countries held intensive talks on Wednesday on a possible rescue for Greece, whose debt crisis has shaken the entire currency union, as civil servants staged the first big strike against Athens' austerity plans. Financial markets gave Greece some respite as investors hoped that other European governments would help Athens to head off a possible default on its debt repayments. REUTERS/John Kolesidis  (GREECE - Tags: BUSINESS POLITICS IMAGES OF THE DAY) - RTR2A1JP

A teller counts euro banknotes. Image: REUTERS/John Kolesidis

Aamna Mohdin
Reporter, Quartz
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Have you ever seen the €500 note? If not, try to get your hands on one soon.

The European Central Bank (ECB) is reportedly considering ditching the denomination (paywall) in a bid to tackle what ECB governor Mario Draghi called the “increasing conviction in world public opinion” that these notes are used for money-laundering and the financing of terrorism.

The Financial Times reported that an “informal decision” has already been taken by the euro zone’s central bank to withdraw the €500 bill from circulation.

And it’s not just central bankers who feel this way. A recent study by Harvard’s Kennedy School called for the euro’s highest denomination notes—the €500, €200, and €100 notes—to be progressively eliminated. Researchers note in the study:

We face an acute threat from well-financed international terrorism, most notably ISIS. Actions that help disrupt the economic underpinnings of such activity must be a priority.

To best illustrate this point, researchers argued that criminals using $20 bills would require four normal briefcases to transport $1 million in cash. But criminals using €500 notes could fit the same amount of money in a small bag.

The plan may be popular with the politicians—French finance minister Michel Sapin said that the €500 bill was “used more to conceal activities than to buy things, more used to facilitate dishonest activities than by people like you and me to get a bite to eat”—but cash-loving Europeans are less enthused.

Germans—who pretty much buy everything with cash—were particularly critical of the German Finance Ministry’s proposal to limit cash payments of more than €5,000 ($5,600). Cash is also king in Austria, where plans to restrict the use of cash were met with fierce resistance.

Since the deadly Paris terrorist attacks last year, European politicians are increasingly concerned with the criminal use of high-value currency. While the number of €10 and €20 notes has remained stable since the founding of the euro zone, the number of €500 notes in circulation has dramatically increased. These notes now make up one third of all cash in circulation in the 19-member euro zone. Last week, European finance ministers asked the ECB to “explore the need for appropriate restrictions.”

High-denomination notes have been eliminated in the past. In 2000,Canada got rid of its $1,000 note. In 2014, Singapore stopped issuing its $10,000 note.

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Geographies in DepthGeo-Economics and PoliticsFinancial and Monetary Systems
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