PARIS - Should the 500 euros bill be taken out of circulation? A study by Merrill Lynch raised the question, and it is not a small question, as those bills comprise one-third of the total monetary value of bills currently in circulation, that is to say some 300 billion euros.
Still, the bills are very rarely used: two thirds of the mauve-tinted bills end up in vaults or under mattresses.
“Though the European Central Bank says it has no intention of suppressing the 500 euro bill, we think it should,” writes Athanasios Vamvakidis, explaining their use is already declining, according to statistics.
The main benefit from ditching big bills? Fighting fiscal evasion: indeed the reputation of 500 bills is terrible. Dubbed the “Bin Ladens” in Spain (where a quarter of the 500 bill European stock circulates, though everyone denies having seen one), they are partly linked to the subterranean and criminal economies.
“In 2006, the Spanish Central Bank investigated why there were so many 500 euro bills in circulation," notes Roberto Saviano, author of a bestselling book about the mob, Gomorra. "The criminal organizations like it because it does not take up much room. A small 45-centimeter-long vault can contain up to 10 million euros.”
Indeed, this is the reason the UK stopped distributing the bills two years ago. A British inquiry showed that 90% of those distributed in the country ended up in the pockets of the bad guys. In 2010, a criminal group was caught with its hand in a cookie jar, or rather in cereal boxes, that they filled with 300,000 euros each, in 500-euro bills. Laundering money, the fraud amounted to £24 million ($36 million).
One of the last big bills in the world, the 1000 Canadian dollar bill disappeared in 2000, while the 500 US dollar bill was withdrawn from the monetary circuit by President Richard Nixon four decades ago.
Hence, the recent study recommends that, from a certain threshold, 10,000 euros for instance, the depositors should justify that their money is of legal origins. And after a certain deadline, bills of suspicious origins and those that have not be deposited would be considered profits by the European Central Bank.
There are other broader benefits to eliminating big bills, according the Merrill Lynch study: for example, it could lower the exchange rate of the single currency, a recurring demand from European exporters, which could boost the euro-zone economies.