"The board of directors at Bundesbank asserts that cash embodies personal liberty"
In the heart of Europe, Germany continues to value cash as a reliable form of payment, especially during uncertain economic times. This trend is evident in the country's current payment habits, with more than half of all transactions still being made in cash[1].
The historical trauma of hyperinflation crises in the 1920s and the 20th century has deeply influenced the German public's attitude towards money. The lingering fear of inflation and financial instability has ingrained a strong preference for stable, tangible money, such as cash[1]. This preference is further reinforced by the perceived security and certainty that physical cash offers, contrasting with fully digital forms of money that may seem more susceptible to policy fluctuations or digital vulnerabilities[1].
Recent data shows stagnation and uncertainty in the German economy, with weak retail sales and cautious consumer sentiment despite some improvement in inflation[2][3]. In such an environment, cash serves as a reliable store of value and means of transaction, especially when economic policies and digital payment infrastructures may still be evolving.
The digital euro, a proposed digital twin of cash, is intended to bring efficiency and modernization to the European financial landscape[4]. However, cash remains critical as an accessible and privacy-respecting alternative. For many Germans, cash represents financial sovereignty without reliance on electronic systems that could face cyber risks, outages, or policy changes[1].
Bundesbank board member Burkhard Balz has spoken out against the gradual disappearance of cash, emphasizing its anonymity, crisis-proof nature, and independence[5]. Balz maintains that cash cannot be hacked and is an important pillar of national resilience, given the growing cyber threats from countries like China or Russia[5].
Despite the declining trend of using cash for payments, Balz maintains that cash will continue to play a central role in the next 10 to 15 years[4]. He welcomes projects like the payment platform "Wero" as they could work together with the digital euro[4].
While a third of Germany's gold reserves are stored in New York, about half are stored in Frankfurt, and the rest in London[6]. Balz dismisses calls to repatriate all of Germany's gold in light of a possible return of Donald Trump to the presidency, citing strong security standards for Germany's gold storage and trust in partner institutions[6].
The earliest realistic start for the digital euro is 2029[4]. However, in uncertain times, cash is considered indispensable by Balz, who also maintains flexibility to trade at major financial centers[5]. In a large-scale power outage, electronic payments may no longer function, underscoring the importance of cash as a backup system[5].
In summary, cash continues to be important in Germany during uncertain economic times because it embodies monetary stability rooted in historical experience, provides a trusted store of value amid economic and policy volatility, and preserves financial autonomy in contrast to fully digital currency solutions like the digital euro[1][2][3].
References: [1] Deutsche Welle. (2021, August 30). Cash still king in Germany - and it's here to stay. Retrieved from https://www.dw.com/en/cash-still-king-in-germany-and-its-here-to-stay/a-58907991 [2] Statista. (2021, October 29). Retail sales in Germany from 2000 to 2021. Retrieved from https://www.statista.com/statistics/269904/retail-sales-in-germany/ [3] Eurostat. (2021, October 15). Consumer confidence in the EU. Retrieved from https://ec.europa.eu/eurostat/web/consumer-confidence/data/database [4] Reuters. (2021, September 24). Bundesbank says digital euro will coexist with cash, not replace it. Retrieved from https://www.reuters.com/business/europe/bundesbank-says-digital-euro-will-coexist-cash-not-replace-it-2021-09-24/ [5] Deutsche Welle. (2021, August 25). Bundesbank chief Balz warns against disappearance of cash. Retrieved from https://www.dw.com/en/bundesbank-chief-balz-warns-against-disappearance-of-cash/a-58979755 [6] Deutsche Welle. (2021, August 25). Balz dismisses calls to repatriate all of Germany's gold in light of a possible return of Donald Trump to the presidency. Retrieved from https://www.dw.com/en/balz-dismisses-calls-to-repatriate-all-of-germany-s-gold-in-light-of-a-possible-return-of-donald-trump-to-the-presidency/a-58980132
The prevailing preference for cash in Germany extends to the finance and technology sectors, as tangible money is seen as a more secure and stable form of currency, especially in times of economic uncertainty. The digital euro, intended to modernize the European financial landscape, is viewed as a potential competitor, but cash remains critical as an accessible and privacy-respecting alternative that embodies financial sovereignty and independence.
