- Any decision to withdraw 500-euro note will be to fight crime
- Savers could still hoard the 200-euro banknote instead
Mario Draghi insisted the European Central Bank would only withdraw its highest-denomination banknote to combat crime, not to curb the use of paper money.
“The 500-euro note and this objective of limiting cash have nothing to do” with each other, the ECB president told European Union lawmakers in Brussels on Monday. “There is a pervasive and increasing conviction in world public opinion that high-denomination bank notes are used for criminal purposes.”
Draghi said the ECB’s Governing Council and its Executive Board are “reflecting” on the matter, his second acknowledgment to lawmakers this month that it is focusing officials’ minds. He spoke days after euro-zone finance ministers asked the central bank to review how the size of its banknotes might assist terrorists’ financing.
“The 500-euro note is being viewed as increasingly an instrument for illegal activities,” Draghi said. “It’s in this context that we are considering action on that front. Of course, we have to do it very carefully and in the best possible way.”
The 500-euro ($558) note has been in circulation since the paper currency went live in 2002. While law-enforcement officials might say the banknote aids criminals, the central bank wants to see evidence before taking any action, Executive Board member Yves Mersch said this month.
Charles Goodhart, a former Bank of England policy maker and an authority on money supply, last year criticized the ECB, the Swiss National Bank and the Bundesbank as “absolutely shameless” in their issuance of high-denomination notes.
“500 euros is a huge number and we’re on a trend to make sure that we discourage fraud, that we discourage corruption and that we combat terrorism,” Luxembourg Finance Minister Pierre Gramegna said last week.
Even if the ECB withdraws the 500-euro note, people will still be able to hoard the next-highest denomination of 200 euros if they want, Draghi told the lawmakers.