The ECB and the praise of cash: 'Crucial during crises'

The unique characteristics of cash - tangible, durable, usable offline, always accepted and a safe haven asset - 'become crucial during crises and can serve to prepare for crises'.

The euro in cash has already played a key role during the Covid-19 pandemic, Russia's invasion of Ukraine, the debt crisis in Greece and the Iberian blackout last April: in all these major crises, the demand for cash skyrocketed. Therefore, it is essential that access to cash is guaranteed and facilitated even in the most remote areas of the eurozone. Moreover, to prepare for future crises, central banks, finance ministries and civil protection agencies in some European countries are beginning to recommend that households keep a reserve of cash at home, sufficient for several days for essential purchases and to cope with sudden and unexpected events. The Netherlands, Finland and Austria already do so. And with good reason.

This can be read in an advance of an article in the ECB's economic bulletin with the eloquent title 'Keep Calm and Carry Cash', which recalls the famous slogan Keep Calm and Carry On of the British Ministry of Information prepared in 1939, before the outbreak of the Second World War, to instil confidence and courage in citizens.

The Dutch, Austrian and Finnish authorities are cited in the study as recommending that citizens 'keep amounts between EUR 70 and EUR 100 available for each family member or sufficient to cover essential needs for about 72 hours'. Finland is considering the introduction of 'interruption-proof' ATMs to ensure access in the event of a blackout. The Austrian central bank, an exception in the euro area, intends to directly operate a cash distribution service for citizens. In principle, however, central banks only assign the task of providing cash to citizens to private banks: the closure of branches and the reduction of the number of ATMs is, however, an ongoing trend, which contrasts with the study's recommendation to guarantee access to cash.

Cash is indeed essential in crises. The economists Francesca Faella and Alejandro Zamora-Pérez, authors of the study, come to the conclusion that in times of emergencies cash plays a role beyond payment: that is why access to cash must be guaranteed and facilitated, on a day-to-day basis but especially during crises. In emergencies, "the appeal of cash is amplified by its tangible nature, which offers comfort and control", it is synonymous with value, immediacy and privacy. In an environment of high instability, cash offers security to the risk-averse. The possession of cash 'generates a social benefit, a positive externality'.