A pedestrian makes a purchase with a 50 euro note in a Saturn shop in Frankfurt, Germany, on Saturday, Oct. 24, 2009. German consumer confidence unexpectedly fell for the first time in more than a year as concerns that rising energy prices and higher unemployment will erode spending power outweighed signs of economic recovery. Photographer: Alex Kraus/Bloomberg
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Nine out of 10 euro banknotes issued in Germany are never used in payments but hoarded at home and abroad as a store of value, the Bundesbank has found.

The extent of stockpiling suggests how banks and individuals have responded to an era of ultra-low interest rates and poor returns on savings. Under the European Central Bank regime to revive the eurozone economy, commercial banks have to pay 0.4 per cent to hold cash on deposit.

“Lenders in Germany last year withdrew about €12bn in cash to physically store it,” Carl-Ludwig Thiele, a Bundesbank board member, told journalists in Frankfurt.

In its three-yearly survey of the use of cash in Germany, the first since the eurozone’s strong economic revival, which last year outstripped the US and UK, the central bank highlighted that most of the euros it produced were used abroad.

In terms of global demand for bank notes, the euro was almost at par with the US dollar as a global reserve currency, said Mr Thiele. “This is an enormous vote of confidence in the currency,” he said.

Overall, demand for cash in the eurozone’s largest economy last year rose 7 per cent — almost twice its nominal growth rate — to €635bn. The Bundesbank is the eurozone’s prime source of cash, accounting for about 60 per cent of the currency area’s bank notes.

The Bundesbank estimates that half the notes it issues quickly find their way outside the eurozone, where they are hoarded by people to store their wealth in a liquid asset. Another 40 per cent is hoarded in the currency area, half of it outside Germany.

If all the cash issued by the Bundesbank were used for domestic payments, every German on average would carry around €7,700. In fact the average is €107, according to Bundesbank figures.

Attempts to turn the eurozone into a cashless society would meet fierce resistance from Germans, with 88 per cent against electronic means of payment, a Bundesbank survey has found. “The vast majority think getting rid of cash entirely would impose large personal constraints,” said Mr Thiele. 

The Bundesbank has previously criticised the ECB’s decision to phase out the €500 bill, one of the world’s highest-denominated bank notes, which was popular with criminals and in the shadow economy.

While cash is still Germans’ preferred way of paying for everyday goods and services, its use is in constant decline. In 2017, 48 per cent of all purchases were in cash, compared with 58 per cent in 2008.

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