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26/07/2016

Austria targets constitutional protection of cash

Euro & Finance

Austria targets constitutional protection of cash

Winning the fight against counterfeiting has been identified as one of the potential advantages of a phase-out of cash.

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Austria is seeking to protect itself against the possibility of cash being eliminated by incorporating it into its constitution. EurActiv Germany reports.

Headlines have been written over the past few days that the EU is considering doing away with cash as a form of payment. The rumour was fuelled by the political debate that has sprung up about the €500 note and the use of one and two cent coins, as well as limits on cash withdrawal.

The Austrian People’s Party (ÖVP) responded quickly to the issue, demanding that a “right to cash” be guaranteed in the country’s constitution. This would be with the aim of preserving freedom of choice and protecting anonymity when paying. The Freedom Party of Austria (FPÖ), the New Austria and Liberal Forum (NEOS) and Team Stronach movements have all gathered behind the ÖVP on this matter. It is only the Social Democratic Party (SPÖ) that sees no need for such measures.

Suspicious bank notes lead to Luxembourg

One third of all cash in circulation in the eurozone is now in the form of €500 notes. Suspicions have been raised over Luxembourg, which prints double its GDP in banknotes each year. EurActiv France reports

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Presidential candidate Andreas Khol (ÖVP) told EurActiv.de that there is a need for a clear line on the issue. Khol is a constitutional expert and had a say in the public discussion that took place over a decade ago regarding the presence of religion in the EU Constitution. When asked about potentially protecting the use of cash in the constitution, he said, “In Austria’s constitution, the use of cash could be made a national objective, if it is a concern for its citizens.”

Moreover, such a move would help set the course of the EU for the foreseeable future. “The point is, the elimination of cash, notes and coins, would need a majority decision from the member states. If it was protected by Austria’s constitution, at least Austria would be bound accordingly,” he added. Khol would not rule out that Austria would raise the issue at a European level. Such a move would “act as a blueprint for likeminded member states and would prevent a majority being formed”.

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What initially stoked the fires of this debate was a group of Scandinavian bankers saying that cash should be phased out as a means of payment. Their rationale was that without notes and coins there would be no bank robberies, counterfeiting or clandestine employment.

A counter argument that many economists have forwarded is that “our society is not ready to dispense with physical cash payments and it will remain a part of day to day life for many years to come”. There are several reasons for this, chief among which is that for smaller purchases, cash remains the quickest and most widely accepted means of payment. It can be used by everybody, even those who do not have bank accounts and it could be argued that physical cash allows consumers to monitor their expenditures more effectively.

In terms of the number of transactions carried out, cash payments remain the most numerous in the eurozone. However, in terms of actual value, digital transactions eclipsed notes and coins. The proliferation of ATMs and bank cards over the last decade has been the main reason behind the decrease in cash payments.