For 190 billion euros of banknotes more

Covid-19 seems to have accelerated the digitization of the European economy, but this does not mean the end of cash. This is how ECB executive committee member Fabio Panetta expressed himself in the Cash in times of turmoil conference of the Deutsche Bundesbank. Panetta explained how the Eurosystem will safeguard physical money, even when a digital euro is launched. Since the beginning of last year, the volume of cash deposited with central and commercial banks has decreased by up to 25% in the euro area. At the same time, a survey commissioned by the Eurosystem in mid-2020 showed that around 40% of respondents used cash less frequently than before. But, despite the significant decline in the use of cash for payments, between March 2020 and May 2021 there was a parallel and significant increase in the demand for euro banknotes for a total value of € 190 billion which, due to each person totals something like 550 euros. According to the Eurosystem survey, in the spring of 2020 the amount of euro banknotes issued exceeded the average value recorded in the previous five years by 4%. The second wave of pandemic has increased the demand for banknotes even more, compared to the expected growth profile, by as much as 8%: “The apparent paradox represented by the increase in demand for banknotes and the concomitant decline in payments in cash can be explained by using cash as a tool to cope with the uncertainty generated by the crisis. Recent analyzes indicate that consumers, especially those with low incomes, reduced their purchases of goods and services and increased stocks of liquid financial assets at the start of the pandemic. This has fueled the demand for cash, which is by far the most liquid financial activity and therefore, by its very nature, more suited to satisfying the preference for liquidity expressed by citizens “. Concludes Panetta:” Given its numerous functions , I expect the money to survive the digital revolution and that people will continue to use it for many years to come “, explaining that the Eurosystem will continue to work to ensure this function, promising to provide a solid supply of money, making sure it is accepted. by traders and working to reduce its environmental footprint. As for a digital euro, this will become a “complement to cash, not a substitute”.