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MONEY

Mixed emotions in Germany as 500-euro note bows out

As the ECB takes the final step in phasing out the 500-euro note, few are expected to mourn a bill favoured by criminals but rarely seen in daily life. Except perhaps in cash-loving Germany.

Mixed emotions in Germany as 500-euro note bows out
Photo: Depositphotos
From Sunday, central banks in 17 of the 19 eurozone countries will stop issuing the violet-coloured banknotes. Only the German and Austrian central banks are clinging on a while longer, until April 26, to “ensure a smooth transition”, the European Central Bank said in a statement.
 
Medical technician Rolf, from the German town of Marburg, said he found the demise of the single currency's highest-denomination note “hard to accept”.
 
Standing a stone's throw from Frankfurt's blue-and-yellow euro sculpture after a meeting in the city, the 61-year-old said he had made a point of paying for his car in 500s.
 
“I prefer using cash for large payments, it doesn't mean I'm involved in anything dodgy,” Rolf said, declining to give his last name.
 
The ECB decision to end the note's issuance will lead to fewer and fewer circulating as commercial banks gradually return them to their countries' central banks, where they will be replaced by lower-denomination bills. But anyone hoarding 500s under their mattress needn't worry, as all existing bills remain legal tender.
 
“They can continue to be used to spend or to save, and they will always retain their value,” said ECB spokeswoman Eva Taylor.
 
The 500-euro bill accounted for just 2.3 percent of all euro notes in circulation last month.
 
 The 'Bin Laden'
 
The banknote's death warrant was signed in 2016 when the ECB formally ended its production over concerns it could “facilitate illegal activities” after research linked its use to money laundering, tax evasion and terrorism financing.
 
Sometimes dubbed the “Bin Laden”, the note has proved a compact way to transport illicit money. A million euros in 500-euro notes weighs just 2.2 kilogrammes, fitting easily into a laptop bag. The same sum in $100 bills, the US currency's highest denomination, would weigh almost six times as much and require a much larger case.
 
While the plan to slowly kill off the 500 made few waves abroad, it sparked an emotional debate in Germany where many feared it was a prelude to abolishing cash altogether. Among the fiercest opponents was Jens Weidmann, chief of Germany's powerful Bundesbank central bank, who said scrapping the note would do little to combat crime but could “damage trust” in the single currency.
 
Critics also said the move would make it more difficult and expensive for banks to physically store large amounts of cash in order to bypass negative interest rates.
 
The ECB's deposit rate currently stands at minus 0.4 percent, meaning banks pay to park excess funds with the Frankfurt institution.
 
'Won't miss it'
 
When the euro was created two decades ago, Germany was keen to have a 500-euro bill as the closest equivalent to its cherished 1,000-Deutsche Mark banknote.
 
But even in Europe's top economy, where privacy is prized and cash is king, the 500 isn't any more widely used than in other countries, and won't be universally missed.
 
Suzanne Spenner, a Frankfurt-based nanny in her mid-fifties, said in her experience the slightly oversized note — an awkward fit in most wallets —  was a pain to get rid of.
 
“They wouldn't take it in the shops. I have no need for it.”
 
A 2017 Bundesbank study found that over 60 percent of Germans have dealt with the 500-euro note at least once, often as a gift, a way of storing money or to pay for large purchases. Across the euro region, the ECB said “more people than often thought use high denomination banknotes”. 
 
In a major 2015-2016 ECB survey, almost 20 percent of eurozone respondents said they had handled a 200- or 500-euro bill in the preceding year.
 
Lucia Bassing, owner of a high-end store selling beds and mattresses in Frankfurt, said while card payments were on the rise, it wasn't unusual for customers to pay for a 3,000-euro bed in 500s.
 
“I personally don't like carrying a 500-euro note on me so I won't miss it,” said the 49-year-old. 
 
“But I'm always happy to accept them from customers,” she laughed.
 
By Michelle Fitzpatrick

MONEY

Where in Germany do people have the highest disposable income?

An economic study has shown huge regional differences in income throughout Germany. So which parts of the country have the most to spend each month, and which are feeling the squeeze?

Where in Germany do people have the highest disposable income?

A study by the Economic and Social Sciences Institute (WSI) of the Hans-Böckler foundation reveals stark regional differences in disposable income in Germany. In some cases, households had as much as double the spending money of those in other parts of the country. 

Here’s where people have the most – and least – disposable income each month.

What is disposable income?

The WSI calculated disposable income as the sum of income from wealth and employment, minus social contributions, income taxes, property taxes and other direct benefits or taxes.

What’s left is the income which private households can either spend on consumer goods or save.

The study, which was based on the most recent available national accounts data for 2019, looked at the disposable income of all of the 401 counties, districts and cities across Germany.

Which regions have the highest and lowest disposable incomes?

The study found that the regions with the highest disposable incomes were in the southern states.

Heilbronn in Baden-Württemberg had the highest disposable income of all 401 German counties and independent cities – with an average per capita disposable income of €42,275. The district of Starnberg in Bayern followed in second place with €38,509.

READ ALSO: REVEALED: How much do employees really earn across Germany’s states?

By comparison, per capita incomes in the cities of Gelsenkirchen and Duisburg in North Rhine-Westphalia were less than half as high, at €17,015 and €17,741 respectively. These regions had the lowest disposable income in the country. 

The study also found that, more than thirty years since German reunification, the eastern regions continue to lag behind those in the west in terms of wages.

According to the WSI, the Potsdam-Mittelmark district is the only district in the former east where the disposable per capita income of €24,127 exceeds the national average of €23,706.

Do regional price differences balance things out?

The study also showed that regionally different price levels contribute to a certain levelling out of disposable incomes, as regions with high incomes also tend to have higher rents and other living costs.

“People then have more money in their wallets, but they cannot afford more to the same extent,” WSI scientist Toralf Pusch explained.

READ ALSO: EXPLAINED: When will Germany raise the minimum wage?

Therefore, incomes in the eastern states, adjusted for purchasing power, are generally somewhat higher than the per capita amounts would suggest.

That could explain why, even after price adjustment, the cities of Gelsenkirchen and Duisburg in western Germany continue to be at the very bottom of the list.

Saxon-Anhalt’s Halle an der Saale, on the other hand, which has an average disposable income of only €18,527, benefits from the lower prices in the east.

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