Recent data from the European Central Bank (ECB) demonstrate that more than half of the The name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More banknotes in circulation were issued by the Deutsche Bundesbank, Germany’s central bank: €1.1 trillion were circulating in the euro zone at the end of 2016, of which €592 billion come from the Bundesbank. The chart here below shows the distribution by country:
Germany has already overstretched its allocation by €327 billion since the introduction of the single The money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More in 2002. But because the issuance of banknotes is completely dependent on demand – which is very high in Germany – the Bundesbank has no means to lower its production. In time, Germany might have to pay the price of this unconditional love for Money in physical form such as banknotes and coins. More. Indeed, when a central bank tops its allocation, an interest has to be paid at the ECB refinancing rate for excess banknotes. Currently at 0%, this rate could be raised in a near future which would cost Germany a fortune. This fee would then be paid to those not exploiting their full allocation, such as Spain and Portugal.
In addition, it has been demonstrated that German euro banknotes tend to “migrate” to other European countries – mainly during the holiday seasons – and are thus stored in other banks’ vaults. Because of this migration, central banks may record more returned banknotes than the number of issued ones and find themselves with a negative net-cash issuance.
To read the original article, please click here.