Tuomas Malinen, a post-doctoral researcher at the University of Helsinki, has voiced his concerns about a plan to introduce restrictions on cash payments in the European Union.
The European Commission recently published its inception impact assessment on a proposal for an initiative to introduce an upper limit to cash payments as a means to step up the fight against the financing of organised crime and terrorism.
“The objective naturally deserves our support,” Malinen states in a blog on Puheenvuoro. “but a ban on cash payments would limit personal freedoms and subject Europeans to the arbitrariness of the European Central Bank (ECB), nation states and the commission.”
The European Commission similarly acknowledges that cash is not only a widely used and the most accessible means of payment but also considered a personal freedom by many citizens.
The anonymity offered to transactions by cash, however, can also be misused for money laundering and financing terrorism, it reminds. “The possibility to conduct large cash payments facilitates money laundering and terrorist financing activities because of the difficulty to control cash payment transactions.”
The European Commission also reminds that a number of member states have already restricted large cash payments.
“There is a case for action at EU level, as the existence of cash payment limitations in some member states, and their absence in other member states, allows activities to be moved across border to elude the cash restrictions,” the commission argues.
Malinen warns that any restrictions to cash payments could ultimately lead to a total ban on cash payments and, therefore, predispose the financial markets to failures.
Greece, he reminds, became effectively a pure cash economy after an intervention by the European Central Bank (ECB) to halt the flight of capital from the country in the aftermath of the country's collapsed bailout talks with the Eurogroup in mid-2015.
“A so-called bank holiday was consequently declared in Greece to ensure banks stayed closed and the government introduced restrictions to capital exports. A daily cash withdrawal limit of 50 euros was introduced,” he writes. “All of the three credit cards we had with us stopped working in two days. The card readers in shops, restaurants and service stations either ‘disappeared’ or stopped working in the same time frame.”
The prohibition would also allow member states and financial institutions to decide freely how the savings of citizens are used, according to Malinen. Central banks, for example, would be able to introduce massive negative interest rates on savings.
“Some of the savings could be seized to bail out banks or the national economy in the event of a crisis in the banking sector or the economy. The state and credit card providers would be able to (technically) monitor the transactions of all citizens. A law to prevent this could be enacted, but it could also be easily amended at a later date,” he states.
Cash, he concludes, is first and foremost a guarantor of individual freedoms.
“Without it, citizens can be readily subjected to the arbitrariness of the state or financial institutions, such as the central bank. [Prohibiting cash payments] could also have unexpected economic effects,” writes Malinen.
Aleksi Teivainen – HT
Photo: Heikki Saukkomaa – Lehtikuva
Source: Uusi Suomi