European Parliament sceptical of Digital Euro

The Economic Affairs Committee of the European Parliament voiced concerns over the digital euro, including costs for banks and unclear benefits for EU citizens, during questions posed to European Central Bank Executive Fabio Panetta on Monday (4 September).

In June this year, the European Commission proposed a digital euro regulation that would set the legal boundaries for the eventual introduction of a digital currency equivalent of the euro.

While the regulation must be approved by EU member states and the European Parliament, most of the technical work is being done by the European Central Bank (ECB), which would eventually be responsible for issuing the digital euro.

But not everyone is convinced.

Centre-right MEP Markus Ferber, for example, worried about the costs that the digital euro system would entail for shops that would have to accept it and for banks that would have to provide the infrastructure without charging users for basic digital euro payment services.

“There shouldn’t be additional fees, but intermediaries would have to invest in a new payment infrastructure of the central bank that competes with the private sector,” he said.

Social Democrat MEP Joachim Schuster, meanwhile, asked what the purpose of the digital euro was. “It’s not very clear to me what the benefits would be to the citizens,” he said.

Right-wing MEP Michiel Hoogeveen from the ECR group put it even more bluntly. “I think it’s a solution looking for a problem,” he said, arguing that the “so-called benefits of a digital euro” were already covered by the instant payments regulation.

That regulation was proposed by the EU Commission in 2022 to make instant payments available to all citizens holding a bank account in the EU and the European Economic Area (EEA).

Panetta’s answers

Panetta, who will leave the ECB to become the governor of the Bank of Italy in November, had an answer to most of the criticism levelled at the digital euro.

Regarding the costs for merchants, Panetta said that there would be no extra charges.

The Commission’s legislative proposal states that fees may not exceed the fees for comparable means of payment.

Panetta argued that a payment option via digital euro would allow merchants to have an alternative to other, more costly payment providers like credit card companies and that this additional competition would lead to lower fees overall.

“As a matter of fact, in our surveys, the merchants are the most enthusiastic supporters,” he said.

The fees that the merchants would have to pay would go to the banks that are compensated for the infrastructure they have to set up and provide to users for free.

“The banks will be compensated for the work they will do,” Panetta said in response to Ferber’s worry about increasing costs for banks. Moreover, he argued that banks could offer users additional services, which they can profit from.

Big Tech does not care

Addressing the general uncertainty palpable among the MEPs in the room, Panetta stressed the need for a cash equivalent for the digital space.

“We don’t have a digital means of payment that can be used everywhere [in the EU], and this is peculiar,” he said.

Moreover, he argued that the alternative was not necessarily the current status quo but a situation in which private digital payment providers, often non-European, would gain ground over cash.

He also pitched the ECB as a better business partner for banks than other players.

“We would leave it to the banks to offer financial services to complement the digital Euro. This wouldn’t be true if big tech would enter into the market,” he said.

“They couldn’t care less, if I can say so, about the potential disintermediation of European banks,” said Panetta, who also warned that a shift away from European providers might undermine the EU’s monetary sovereignty.

He then argued that the digital euro offer more privacy than private digital payment providers, as it would allow for anonymous offline payments and because the ECB could not identify the holders of digital euro accounts.

MEPs now have the chance to shape the regulation together with EU member states. Only once the regulation is passed by both the Parliament and EU countries, will the ECB be able to issue the digital euro within the limits provided by said regulation.

Digital euro: EU Commission wants the real deal

Welcome to EURACTIV’s weekly Economy Brief.

[Edited by Alice Taylor]

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