The article, titled, "Beyond monetary policy – protecting the continuity and safety of payments during the coronavirus crisis", sheds light on some of the crucial (though largely underrated) work for establishing socio-economic stability in times of uncertainty. Unsurprisingly, keeping cash accessible plays an important part.
Recent speculation on how demand for banknotes and coins has changed amidst the current pandemic makes this read essential for the payments debate. While by nature, the use of cash is unpredictable and immeasurable, Panetta explains why cash continues to be "the dominant means of payment for consumers" and of "fundamental importance for the inclusion of socially vulnerable citizens, such as elderly or lower-income groups".
"Overall, banknotes do not represent a particularly significant risk of infection compared with other kinds of surface that people come into contact with in daily life."
The provision of banknotes
Adequate availability of cash is crucial for the functioning of the economy. Even in normal times, three-quarters of consumer transactions in the euro area are made in cash, with large countries such as Germany, Spain and Italy using cash at rates that are around or even well above the euro area average. Cash thus remains the dominant means of payment for consumers, and is of fundamental importance for the inclusion of socially vulnerable citizens, such as elderly or lower-income groups.
During the crisis the demand for cash has become less predictable.
"As the pandemic spread across Europe, we saw a spike in demand for cash: in mid-March the weekly increase in the value of banknotes in circulation almost reached the historical peak of €19 billion."
This increase partly reflected higher spending in supermarkets and shops – especially from 13 to 20 March, when the demand for cash was similar to that in the week before Christmas. But it also reflects people’s impulse to hoard cash during a crisis. The rising demand for cash in times of extreme uncertainty is not a new phenomenon; such increases were seen during the financial crisis in 2008, and there is generally co-movement between the volume of banknotes in circulation and indicators of financial tension.
In early April cash demand returned to normal levels, and several countries are now seeing cash withdrawals below expected levels for the time of year; this is partly due to the lockdown, which has limited the opportunities for spending.