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Cash Is King as Europe Adapts to Negative Interest Rates
Europe’s ATMs worked overtime in 2015. A record 1.08 trillion euros ($1.17 trillion) of banknotes were in circulation, almost double the value 10 years ago, according to data compiled by the European Central Bank. That’s a counterargument to some bankers who say that electronic forms of cash will replace paper money sooner rather than later.
The value of banknotes in circulation rose 6.5 percent last year, the most since 2008. There are financial reasons - including negative rates on deposits - but part of the increase could be related to the influx of refugees, who don’t have bank accounts.
“Stronger economic growth, low interest rates as well as maybe some worries about more turbulence on financial markets are driving cash holdings,” said Johannes Mayr, an economist at Bayern LB in Munich.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.