It was November 17, 2011. The newly created senator for life Mario Monti, imposed by Giorgio Napolitano as Prime Minister after the ouster of Silvio Berlusconi’s government with the motivation that the euro had to be saved, appears at Palazzo Madama and in his programmatic speech declares: «We need to further lower the threshold for the use of cash and encourage greater use of electronic money».
On 17 September, however, the ECB recommended: “Keep calm and carry cash”. The reflection is entrusted to a study by Francesca Faella and Alejandro Zamora-Pérez who advise Europeans to keep a pocket of loose change that lasts at least three days as a lifesaver in case of catastrophes or emergencies, as happened last April in Spain when the electricity blackout made ATMs unusable. In short, stay calm and rely on old paper money.
Naturally, the Eurotower was quick to say that this recommendation does not at all deny the goodness of electronic money, that indeed rapid steps will be taken towards the digital euro – among the most convinced supporters of this intangible currency is Piero Cipollone, member of the ECB board -, but that cash remains an insurance for everyday life. Romano Prodi – another builder of Europe’s monetary architecture – years ago instead came up with the proposal to tax cash.
The former Prime Minister and former President of the European Commission argued on television that «too much money circulates in Italy: we need to make it convenient to use the credit card even for small payments. Large sums must be paid only with electronic money and for cash we must make sure to discourage it by making it inconvenient: that it costs something to handle the money”. Translated: we tax cash. This is an old idea even from the Confindustria Study Center: putting a 2 percent tax on cash money.
Vincenzo Visco, the tax hound of strict order first to the PCI and then to the Pd, replied that it was of no use, because “the real evasion lies in the companies’ balance sheets”. It was 2019 and there was no creeping war or even Covid on the horizon. Did these changed living conditions change the ECB’s mind? Possible.
On the Eurotower website it is written: «Cash is an important part of your freedom to choose how to pay and is essential for the financial inclusion of all groups in society». So why did they wage war on him for years? Because states know that through cash citizens are free and, if they want to collect taxes, taxation must be efficient. Faella and Zamora Peres explain this very well, highlighting: «In moments of crisis – from the blackout in Spain to Covid via the invasion of Ukraine – the availability of cash is also a factor of psychological stability. If you don’t have money physically available in times of crisis, demand is blocked and the economy collapses.”
A very serious matter which partly explains why Prodi like Monti, with their obsession with tax evasion which not even the reformist centre-left guru Ernesto Maria Ruffini has managed to eradicate, have contributed to sinking the Italian GDP: by weakening consumption they have destroyed productivity and nailed down wages. The counterproof? The underground economy in our country is worth around 200 billion euros, to which however the 30 generated by prostitution, gambling and drug dealing must be deducted. Eurostat counts it as GDP. Preventing the circulation of 10 percent of demand would mean bankrupting Italy. It may be cynical, but it’s real. And the ECB led by Christine Lagarde also knows this, but not the local left which has made a flag of the battle against cash.
Roberto Gualtieri, now PD mayor of Rome and Minister of Economy in the Conte II executive, which marked the leftist turning point of the 5 Star Movement, declared: «The dream of this government is an economy where payments are dematerialized and traceable and we will make the fight against cash our priority». The mayor with a passion for the guitar said that only by abolishing it can tax evasion, crime and terrorism be fought. In short, in 2020 banknotes are eradicated for security reasons and five years later the ECB says to keep at least 100 euros per person at home to combat insecurity?
The truth is that the fight against physical money has nothing to do with fighting illicit activities. The OECD made this very clear already in 2017 and the Bundesbank in a 2019 study demonstrated that reducing cash affects the underground economy by 2 to 20 percent, corruption by 1.8 to 18 percent and crimes by 5 to 10 percent. Results that are too modest to compress the freedom of citizens which the ECB, moreover, has always defended by claiming that the only justified limitations on cash are anti-money laundering ones (above 10 thousand euros).
With its research five years ago, Eurotower states that European citizens make 73 percent of payments in cash, with high usage in the 18-24 age group. The country that pays the most in this way is Germany, especially in the East where the mark still circulates. In the last year in Italy the credit card has set a record. We paid 481 billion, exceeding cash for the first time and recording an increase of 8.5 percent compared to 2023 (data from the Innovative Payements Observatory of the Polytechnic of Milan.) Therefore, the Frankfurt recommendation, if on the one hand refutes the catastrophist narrative regarding tax evasion, on the other hand meets the security needs expressed by pensioners who shop at the market. Because the advantages of “fresh” are precisely described by the ECB: “It ensures freedom and autonomy for everyone, it guarantees privacy, it helps to keep track of one’s expenses, it is fast, it is a store of value”. The monetary aggregate M2, which is the final balance of the wealth circulating in Europe, is estimated at 55 thousand billion: of this in cash there is approximately 6,400 billion euros.
Therefore the recommendation does not at all deny the progress towards the digital euro, which is very different from bitcoin which is a private currency linked to often questionable indices. The digital euro – as Cipollone designed it – is nothing more than a euro via the Web, accessible to all, used for payments like money and controlled by the ECB. The experimental phase is expected to begin next year. But in the meantime, to avoid hacking or a blackout blocking ATMs and computers, it is better to have some “real” money in your pocket. With all due respect to Romano Prodi.
