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Cash demand surges in Europe despite coronavirus lockdown

16-04-2020, 15:32

The value of euro banknotes in circulation has increased by the largest amount since the 2008 financial crisis, according to new data which indicates many people in Europe have responded to the coronavirus pandemic by hoarding cash, BAKU.NEWS informs with reference to the Financial Times.

In the four weeks to April 10, the value of euro banknotes distributed to individuals and businesses rose by €41.2bn to €1.33tn, the weekly financial statement published by the European Central Bank on Wednesday showed.

That is the biggest jump in the amount of cash in circulation in the eurozone since it rose by €41.4bn in the four weeks to October 24, 2008 — shortly after Lehman Brothers went bankrupt, causing the global financial system to freeze.

In some European countries, where cash is still the only way to pay in many shops and cafés, consumers responded to concern about the spread of coronavirus by withdrawing extra cash from ATMs at the start of the pandemic.

About a third of all cash in circulation is kept by households as a safe asset for “rainy day” purposes, according to a previous ECB study. The increase in demand for banknotes was comparable to the uptick usually seen in the weeks before Christmas, suggesting it was linked to the recent increase in spending on household items, such as toilet paper, pasta, and soap, as many consumers stocked up.

In research published on Wednesday, Ireland’s central bank reported a sharp fall in ATM withdrawals and bank card transactions after the government directed people to stay indoors last month.

ATM withdrawals in Ireland were down 57 percent month-on-month in the first week of April after the first coronavirus restrictions were introduced. Card spending was down one-third in the same period. Average ATM withdrawal amounts “increased markedly” since the government announced it was closing schools on March 12, the central bank said.