Journalist covering global financial, economic, and political developments
Demand for Cash In Euro Area Is Rebounding Just As ECB Prepares to Launch Digital Euro
The ECB insists that cash’s role will be protected once the digital euro goes live. But can its word be trusted?
This is a story you’re unlikely to see on the front pages — or indeed any pages — of Europe’s newspapers: cash is staging a comeback. According to the European Central Bank (ECB), the amount of cash in circulation in the Euro Area’s 20 member states is once again growing after “plateauing” for a couple of years (2023-2024). Speaking at the European Chamber of Commerce on Monday, ECB executive board member Piero Cipollone said:
At present, 30.4 billion banknotes are in circulation, with a total value of €1.6 trillion. After plateauing when we raised interest rates – which made it less attractive for people to hold large amounts of savings in cash – these figures are growing again, currently at an annual rate of 2.3% in terms of volume and 1.7% in terms of value. To put it into perspective: almost €5,000 worth of banknotes are currently in circulation for each euro area citizen.
The demand for cash during crises, such as the 2008 financial crisis, the European sovereign debt crisis and the COVID-19 pandemic, underscores its importance, especially in turbulent times. Chart 1 highlights the robust demand for banknotes, with spikes during these crises when the annual growth rate of banknotes in circulation more than doubled. The ECB and the national central banks (NCBs) maintain ample stocks of banknotes and effective distribution channels to ensure they are ready to meet these sudden surges in demand.
Possible Reasons for Cash’s Rebound
Aside from Cipollone’s rather questionable explanation, of plateauing interest rates, it is not entirely clear why demand for euro notes and coins is increasing once again.
Could it be fear of another looming crisis? Given the state of Europe’s economy and the destabilising impact of Trump’s tariffs, it’s perfectly possible. There’s also the accelerating (though still somewhat genteel) decline of the US dollar? In June, the ECB President Christine Lagarde posited that a “global euro” could be a major beneficiary of that decline — a notion that Thomas Fazi dismissed as fantastical given the currency’s myriad structural flaws.
Or is it that more and more people are storing emergency reserves of cash at home, as some European governments and even the EU itself have recommended in recent months. It’s also true that the anomaly in the long-term trend is not the recent return to growth but rather the brief period of negative growth that preceded it.
One thing that is clear is that cash use remains strong in the Euro Area despite the growing popularity of digital payments. While the overall share of cash payments at the point of sale (POS) has declined in recent years, it still accounted for 52% of transactions in 2024, according to the European Central Bank’s (ECB) 2024 Study on the Payment Attitudes of Consumers in the Euro Area (SPACE). That’s down from 59% in 2022 and 72% in 2019.
It’s still a surprisingly high figure, especially given the concerted efforts of cash’s legion of enemies (banks, payment processers, big tech, fintechs, governments and, in some cases, central banks) to impede its use. Cash also accounts for 39% of the total value of POS payments across the Euro Area, as the bottom bar in the chart below shows.
The most cash-intensive countries in the Euro Area are Malta (67% of the share of payments are in cash), Slovenia (64%), Austria, Spain and Slovakia (57%), and Germany (52%). The less-cash countries are the Netherlands (22%), Finland (27%), Luxembourg (37%) and Belgium (39%).
A Tool of Trust
The resilience of cash payments in the Euro Area mirrors similar trends we have seen elsewhere. In the UK, for example, cash use has rebounded slightly since 2022 — despite all the efforts by the largest lenders to restrict cash access. Data from the Nationwide Building Society in January this year showed that cash payments have risen for a third year in a row — findings that are backed up by data from the British Retail Consortium.
These trends counter the prevailing narrative of the past decade — that cash’s decline is as inevitable as it is desirable, and that a cashless economy is a matter of when not if. That belief was reinforced by the unprecedented explosion of e-commerce and contactless payments during the COVID-19 lockdowns. But that trend has slowed — and in some places, reversed — in the past couple of years.
Many have rediscovered — or in the case of many Gen Zers, discovered — the budgetary benefits of using cash at a time of sticky inflation. Geopolitical trends have led some of the world’s most cashless countries (Sweden, Norway, Finland…) to reconsider the wisdom of abandoning cash altogether while recent natural disasters and payment outages, including Spain’s recent one-day blackout, have shone a spotlight on the fragility of cashless economies and the vital role of cash as a contingency payment option.
In a world that seems increasingly fragile, cash stands out as a tool of trust, a source of systemic resilience. In 2022, holding cash at home surged, especially among 18-37 year olds, according to the ECB’s SPACE report. This age group, considered ultra-digital, increasingly sees cash as a fallback solution. In the Euro Area as a whole, 62% of respondents said it is important to be able to pay in cash. Even in the most digitally advanced countries, this option remains vital.
At the same time, however, most central banks around the world, including the ECB, are forging ahead with plans to launch a central bank digital currency. According to the Atlantic Council’s CBDC tracker, 137 countries & currency unions, representing 98% of global GDP, are exploring a CBDC. That apparently includes the US, which is curious given the Trump Administration’s recent executive order halting all work on a retail CBDC:
In 2025, President Trump issued an executive order to halt all work on a retail CBDC, making the US the only country to do so. However, the US continues to engage in wholesale cross-border payments research through Project Agorá, an initiative in collaboration with six other major central banks.
The Euro Area, like 40 other jurisdictions, including all five founding members of the BRICS, is at the pilot phase. According to the Atlantic Council’s CBDC tracker, the world’s largest currency bloc is “advancing a ‘global euro moment as it pilots the digital euro, aiming to strengthen the euro’s international role.” The “preparation” phase of the digital euro is scheduled to end this October as the European Parliament, the EU’s rubber stamping chamber legislative assembly, votes to approve the definitive legal framework for the bloc’s proposed CBCD.
So, how do you sell a project whose advocates (in the words of Federal Reserve Governor Christopher Waller) “often fail to ask a simple question: What problem would a CBDC solve?”
The answer, it seems, at least in the case of the Euro Area, is to generate as much fear as possible about Europe’s outsized dependence on US payments providers as well as the growing threat posed by (predominantly US-based) stablecoins.
The European Central Bank chief economist Philip Lane has warned that Europe’s outsized dependence on US payment providers could leave it open to future economic coercion.
This, lest we forget, is the same trade and currency-bloc that has prostrated itself before Trump by signing one of the world’s most unbalanced trade deals ever.
The most cited justification for launching a CBDC is to preserve the relevance of public money. In most modern economies, a tiny fraction (just 3-5%) of money takes the form of physical cash created by the central bank. The remaining 95-7% comes in the form of electronic bank deposits created by private commercial banks, which is not public money.
ECB President Christine Lagarde says the digital euro is necessary in order to preserve Europe’s monetary sovereignty — oh, the irony. According to the German financial journalist Norbert Häring, the only identifiable function of the digital euro is to “help displace cash and bring Europe closer to total digital surveillance.”
EU officials insist that the adoption of the digital euro will not signify the end of cash. In his talk to the European American Chamber of Commerce on Monday, Cipollone said EU authorities “are fully committed to cash and are working to ensure that it remains widely available and accepted”:
[R]est assured: a digital euro will not replace banknotes and coins but rather complement them, offering a “digital expression of cash”[20] that expands the benefits of cash to digital payments. The availability of cash in both physical and electronic form will strengthen Europe’s autonomy in payments. With a digital euro alongside cash, Europeans will benefit from a broader range of payment methods. They will be able to use central bank money for nearly all types of payments, including online transactions, and they will benefit from enhanced safety, security, efficiency, privacy and inclusivity.
As we move forwards, euro area consumers will appreciate having banknotes, coins and digital euros in their wallets – all with legal tender status, accessible anytime and anywhere, and tailored to diverse payment preferences and scenarios. Cash will therefore remain highly relevant and will exist alongside other means of payment. Particularly in times of crisis, cash can serve the public’s critical needs that alternatives cannot fully replace.
Cash, Cipollone pointed out, remains functional even when electronic payment systems are disrupted by power outages, internet failures, software malfunction or other events:
Recent natural disasters and geopolitical tensions have underscored the urgency of ensuring cash continues to circulate to support confidence and economic stability during crisis episodes.
The ECB collaborates with the European Commission on the EU Preparedness Union Strategy, which emphasises the role of cash in strengthening societal resilience. We also work closely with the NCBs to enhance crisis preparedness and ensure that cash remains available during emergencies. The recent power blackout in the Iberian Peninsula once again demonstrated that cash, being independent of technology, can always be relied on.
The ECB will apparently work together with banks, arguably the biggest enemies of cash, to ensure that communities across the Euro Area will have adequate access to cash services — “striking the right balance between fulfilling consumers’ needs and enabling banks to enhance their efficiency.” At the same time, Cipollone says that the ECB and Commission will be setting clearer rules for the mandatory acceptance of cash across the Euro Area:
Practices such as merchants refusing cash or displaying “no cash” signs are not only undesirable, as they restrict the payer’s freedom of payment choice, but are also fundamentally inconsistent with the legal tender status of euro cash, as interpreted by the Court of Justice of the European Union (CJEU).[14] One of the reasons why the ECB strongly opposes such practices, which unfortunately seem to be becoming more widespread, is that they risk excluding some members of society, especially those that rely on cash.
The ECB stressed this critical stance in its opinion on a proposal for a regulation on the legal tender of euro banknotes and coins, in which it advocated for a clear prohibition of such “no cash” practices. To address this issue, the designated national competent authorities must monitor and enforce compliance once the Legal Tender of Cash Regulation comes into effect. Furthermore, as with any European Union regulation, Member States must establish effective and deterrent sanctioning regimes.
Too Good to Be True?
It all sounds too good to be true, and probably is — especially if the European Commission is in any way involved, which it almost certainly will be…
Nick Corbishley 