The coronavirus pandemic has created a ‘paradox’ in the way in which cash is used, in accordance with the European Central Financial institution, after the quantity of euro banknotes in circulation elevated by 156 billion euros throughout the yr elapsed regardless of declining liquidity as a proportion of each day transactions.
The 12.2% improve in bodily euros in circulation stems primarily from the truth that EU households have amassed extra liquidity in response to the uncertainty and disruption of the pandemic, a defensive reflex identified in a number of crises earlier, the ECB stated.
In lots of European international locations, the place money is usually the one approach to pay in some outlets and cafes, shoppers have responded to considerations concerning the unfold of the coronavirus by withdrawing more money to maintain it in reserve after the pandemic. which hit a bit over a yr in the past.
This has occurred regardless of a pointy improve in on-line buying and better use of contactless card and smartphone funds, which have been inspired in some shops to cut back the danger of transmission of Covid-19 by dealing with money. This was an enormous change in a rustic like Germany, the place three quarters of in-store transactions are sometimes performed in money.
“Latest funds surveys point out that the share of money transactions within the euro space has declined,” the ECB stated in a analysis bulletin. “This, mixed with the continued digitalization of retail funds, may have resulted in a lower in demand for liquidity. Nonetheless, this discount in demand didn’t happen. “
“This seemingly counterintuitive paradox will be defined by the demand for banknotes as a retailer of worth within the euro zone. . . coupled with the demand for euro banknotes outdoors the euro zone. “
The worth of euro banknotes in circulation elevated from 1.28 billion euros in February 2020 to 1.43 billion euros in February 2021, rising on the quickest price for the reason that monetary disaster of 2008.
4 in ten individuals polled by the ECB final July stated they’ve used contactless cost playing cards extra typically for the reason that begin of the pandemic and an identical proportion stated they used money much less typically. Using money to pay for items and companies in shops had already fallen from 53% of the worth of those transactions in 2016 to 47% in 2019.
“The decreased stream of banknotes out and in of Eurosystem central banks signifies that lively circulation has declined, suggesting larger precautionary demand, presumably resulting from elevated uncertainty and decreased mobility,” stated declared the ECB.
Nonetheless, there’s nice divergence in using money between European international locations. One in six Greeks polled by the ECB in 2019 stated they used money to pay their lease or mortgage, and a fifth of Italians stated they paid their electrical energy payments in money, whereas virtually nobody in France or the Netherlands didn’t use money for both.
The full amount of money reserves was between € 1,270 and € 2,310 for each grownup within the euro space – though this consists of cash saved in safes or safes at monetary establishments and firms. The ECB stated banks had elevated their money reserves in safes by round € 30 billion since its deposit price turned unfavourable in 2014.
The ECB stated: “Whereas money is used extensively as a protected haven throughout occasions of potential market turmoil, it might be obligatory to carry giant strategic shares of banknotes to fulfill terribly excessive demand in periods of time. disaster. “
General, the central financial institution stated simply over a fifth of banknotes in circulation had been used for transactions, with the rest getting used both as a retailer of worth or to fulfill overseas demand for euros outdoors of the nation. block of 19 international locations with a single foreign money.