FRANKFURT, Germany (AP) — Production of the 500-euro banknote is being discontinued amid concerns it had become too popular among crooks and money launderers.
The European Central Bank, the monetary authority for the 19 countries that use the shared currency, made the decision at a meeting Wednesday.
The ECB said it was taking into account concerns that the banknote, which is worth around $580, “could facilitate illicit activities.”
The banknotes currently in circulation will remain legal money for now but no additional ones will be issued from existing stocks after late 2018.
The central bank assured that the bills could be exchanged at national central banks of euro member countries “for an unlimited period of time.”
The 500-euro bill — the biggest denomination for the euro — is not often seen in day-to-day circulation, and some merchants don’t take them. An ECB survey found that 56 percent of respondents said they had never seen one. Yet they make up around 30 percent of cash euros in circulation and have turned up in money-laundering investigations.
One reason, according to EU law enforcement agency Europol, is the ease of transport: A million euros in 500-euro bills weighs 2.2 kilograms, or just under 5 pounds, and fits in a laptop bag.
Using 50-euro bills, the same million would weigh 22 kilograms, or 48 pounds, and would require an inconveniently bulky suitcase.
A Europol report says that criminals like them so much they occasionally change hands above their face value in the underworld.
When cash euros replaced national notes and coins in 2002, the 500-euro bill was worth roughly as much as the largest German bill then in circulation, the 1,000-mark note.
Economists in cash-friendly Germany have criticized proposals to discontinue the large bill.
Clemens Fuest, head of the Ifo research institute, argued that getting rid of large bills in theory makes it easier for the central bank to impose even deeper negative interest rates, by making it harder to keep large amounts in cash.
Even if that never happens, “the abolition of the 500-euro bill undermines trust in the European Central Bank,” Fuest said in a statement Wednesday. “It leaves the impression that the main reason… is the intention to push rates farther into negative territory.”
The ECB has already imposed a negative interest rate of 0.4 percent on overnight deposits from the central bank. Its benchmark lending rate is zero. The low rates are an attempt to raise weak inflation and modest growth, but they also squeeze bank profits. Another — and unpopular — side effect has been low or nonexistent returns to savers.
Those looking for large bills could still go with the 1,000 Swiss franc note, worth around $1,050, or 910 euros.
The United States stopped making new $500 and $1,000 bills during World War II. Their main use was for bank transfer payments, a need that disappeared with more secure technologies, according to the U.S. Treasury Department website. The largest U.S. denomination is $100.
The 500-euro bill is being discontinued after criticism that the banknote had become a handy aid to money laundering. The European Central Bank’s 25-member governing council made the decision at a meeting Wednesday May 4, 2016. (AP Photo/Heribert Proepper, File)
Copyright 2016 The Associated Press. All rights reserved.
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