Batten down le hatches

Sliding prices and rising debt burdens heighten fears of a looming economic storm for ECB Ambrose Evans-pritchard

A DIGITAL version of the euro could be on the way as the European Central Bank set out its plans for a potential new form of currency.

It would sit alongside cash as a digital equivalent, the bank said, as an alternative to private sector payments systems, and a guarantee of central bank control of a modern currency.

“The euro belongs to Europeans and our mission is to be its guardian,” said Christine Lagarde, the ECB president.

“Europeans are increasingly turning to digital in the ways they spend, save and invest.

“Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”

That need could arise if cash use fell dramatically, and the ECB wanted to ensure everyone had access to cash, or if a foreign digital currency gained popularity.

“A digital euro may even become essential in a number of possible scenarios,” said an ECB report. “For example, if the use of cash were to decline significantly, other electronic payment methods were to become unavailable owing to extreme events, or foreign digital money were to largely displace existing means of payment.”

The idea of digital currencies has been raised in the public consciousness

‘Our role is to secure trust in money. This means making sure the euro is fit for the digital age’

by the rapid rise and subsequent fluctuations in Bitcoin, as well as Facebook’s proposed currency, Libra.

Officials said they would continue to issue cash, but the idea of a digital currency could raise new ways of conducting monetary policy.

For instance, without physical cash, it is easier to take interest rates into negative territory, because individuals cannot simply take the cash out of their accounts and stash bank notes under their mattresses.