28 January, 2012

Look for the letter


Faisal Islam, of Channel 4 News, is reporting that a leading European bank is discriminating between euro notes issued in different countries. I have reported on this possibility before: German notes are marked with an X, French ones with a U, Greek with a Y, Italian with an S.

What this means if it is true is that there is now an internal exchange rate within the EU.

Actually I don’t really think it is true. Only a tiny proportion of a bank’s balance sheet is actual notes so it probably wouldn’t be worth the effort, particularly since it could go to the ECB and exchange them at any time. But it is intriguing: it means that if there is a sudden removal from the euro, and the central bank of the departing country doesn’t have time even to put a sticker on the notes, the ECB will simply eliminate from the system all notes beginning with, say, Y.

And if it is going to these lengths, it means the bank thinks it is worth it.


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