Controversy in Germany over plans to cap cash transactions

FEB 4, 201611:40 PM

[BERLIN] A proposal by German Finance Minister Wolfgang Schaeuble to introduce a ceiling for cash payments to help combat money laundering and the financing of terrorism came under fire in Germany Thursday.

In a country where people still overwhelmingly prefer to pay in cash, even the central bank or Bundesbank was critical of the government's proposal.

"For citizens, any restriction in the usage of cash is a infringement on their personal economic liberty," said Carl-Ludwig Thiele, who is responsible for cash management on the Bundesbank's executive board.

Hans Michelbach, financial expert in the conservative CSU party, was similarly opposed.

Introducing a limit on cash payments would mark an "unjustifiable encroachment in citizens' freedom of action," he said.

Newspapers were also up in arms, with the business daily Handelsblatt saying the government was "waging a war on cash." The daily Sueddeutsche Zeitung warned against the negative effects on important sectors such as skilled trades and crafts or the second-hand car sales.

On Wednesday, Schaeuble had suggested that a 5,000-euro (US$5,500) limit be placed on cash transactions, but that it would be need to be implemented at a Europe-wide level in order to be effective.

Around 79 per cent of payments are made in cash in Germany, according to Bundesbank statistics.

Critics, such as the OECD (Organisation for Economic Cooperation and Development), have complained this makes money laundering easier.

According to a study commissioned by the finance ministry, as much as 100 billion euros of dirty cash is laundered in Germany each year.

In the context of combatting the financing of terrorism, the EU promised earlier this week to examine, along with the European Central Bank, the use of 500-euro banknotes, which are in demand in criminal circles for their high volume and low volume.

AFP