Even Counterfeiters Are Giving Up On The Euro

My first experience with a physical euro was mid-December 2001 when I travelled to Europe for preliminary discussions with potential partners for the startup I ended up launching later that year. First stop: Germany. Bank showcases were filled with euro feel-good agitprop. Euro bills and coins would enter circulation on January 1, and this was part of the long-running campaign to persuade Germans to surrender their Deutsche marks. People had some apprehensions, and some wanted to retain the D-Mark, but my business contacts were gleeful: the euro would become the dominant reserve currency in the world; oil would be priced in it.

To celebrate this unique moment in history, I entered a Deutsche Bank branch and bought several euro Starter Packs, as they were called in good German. The clear plastic pouches cost DM 20 and contained all denominations of euro coins. I handed them out as souvenirs when I came home.

The following year, the euro was in every Eurozone wallet. OK, people were bitching. Things had gotten more expensive. Little but highly visible things. Merchants rounded up. An espresso in Germany might have cost DM 3 but then sold for €2, instead of €1.50 as it should have.

By then, I’d moved to Belgium—without feel for what things had cost beforehand. What I did notice was how easy, cheap, and fast transactions were with Eurozone countries. I was too busy building a company to worry about birth defects and fatal flaws of the monetary union that covers not only the 330 million people in the Eurozone, but another 150 million people in Africa whose currencies are pegged to it, and maybe 20 million people in other countries with currency pegs. And for nostalgic reasons, I would like the euro to survive.

But that may be wishful thinking. Every day brings new developments that raise my doubts further: turns out, even counterfeiters have lost confidence in the euro.

In fact, the euro counterfeiting bubble has collapsed. The ECB, in its biannual reports on euro note counterfeiting, documented the bubble and its demise.

After a fairly steady period through 2006, euro counterfeiting jumped 70% to its peak in the second quarter of 2009. Alas, following on the heels of the financial crisis, the Eurozone debt crisis began to gnaw on periphery countries, and counterfeiters lost confidence along with the rest of the financial markets. By the first half of 2012, counterfeiting had crashed 44%. And not much but thin Alpine air appears to be underneath it.


The ECB measures counterfeiting by the number of fake bank notes that are pulled from circulation. The most common fake (42.5%) was the €20-note followed by the €50 note (34.5%). The least common were the €5-note and the €500-note. 97.5% were confiscated in the Eurozone, 2% in other European countries, and 0.5% elsewhere.

The fact that counterfeiters are throwing in the towel—worried perhaps that they’ll get stuck with high-risk but unsalable merchandise—is bad enough for Europhiles. But now we see an increasingly clear demarcation of the Eurozone into two separate parts, though not entirely along the lines of North and South often envisioned.

On one side of the line are countries whose governments can borrow at negative yields, that is, where desperate investors agree to lend money to them at a guaranteed loss, however absurd that might have seemed not too long ago. That club includes Germany, France, the Netherlands, and Belgium (!); in the secondary markets, Finnish and Austrian government debt has seen negative yields. Eurozone neighbors Denmark and Switzerland also dipped into negative yields. Negative Interest Rate Policy (NIRP) at work.

On the other side are countries whose governments lost access to the financial markets or are in the process of losing access. Among them Spain. Its yields continued to push higher, despite the €100 billion bank bailout that climbed over its final hurdle, German parliamentary approval. With 10-year paper above 7%, the country is approaching a full bailout—though it won’t solve the core problem: a collapsed economy with unemployment of 24.4% and youth unemployment over 50%.

Perhaps the Eurozone will perform a miracle and solve the debt crisis (unlikely), or all 17 nations might agree to rewrite the treaties that govern the ECB to allow it to print money and buy sovereign debt with reckless abandon (also unlikely). More likely, the can will be kicked down the road, with one or two countries exiting the Eurozone along the way. When push comes to shove, the Eurozone might break into two parts, possibly along the NIRP line, or it might break into national currencies. So I will hang on to my Starter Pack, that unopened plastic pouch of pristine euros never touched by a human hand—because one day, I’m afraid, it might become a collector’s item.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  7 comments for “Even Counterfeiters Are Giving Up On The Euro

  1. Tedbits says:

    Your picture of bags also reminds me of the little bags EU business travelers would carry around containing each country's currency before the Euro. Working in Europe at the time when the changeover was occurring was quite interesting. None of my EU business partners seemed to understand their eventual loss of sovereignty. All they could focus on was the convenience of not having to do currency exchanges. Here in the US we formed a nation of states long before we formed a single currency. I think the sequence is important.

  2. Wolf Richter says:

    Tedbits – excellent point. It took the US a long time, a civil war, other wars, and outright purchases to become a political union before it became an actually currency union. In the EU, people don't actually want to do that, not yet, and maybe never. National identities are very strong.

  3. Misplaced_ says:

    My answer to your question on Twitter "How are the people around you reacting to the crisis?" is too trivial.

    Living in Northern Italy (Como lake area) let me observe much personal wealth and
    real :-) "social network" at work, on family and business level…between locals.
    Italians are talented people, and it's not a mere stereotype. It's a bonus.
    And they also often unconscious. It helps (to move on) and it warns too (yes it does).

    So, every kind of actual problem is muffled by previous accumulation (from early 60s first economical boom to 80s "made in Italy" boom),
    and I suppose, You know the percentage of personal savings in past decades.

    Only a people with some eco- geo- poli- interests and/or a degree shows a strong concerns of some kind.
    Or those who lose their jobs {In my area , i mean Provincia di Como, unemployment is around 5,1% (http://www.urbistat.it/it/classifiche/tasso-disoccupazione/comuni/como/13/3).
    In Italy, generally, is around 10,2% (04.2012). In south Italy is much worser…especially between young people. (one in three are unemployed)}

    Everybody talks, yes, but a few people fears.

    By now, everybody knows what the world "spread" means(2 yrs ago only a tiny part of society) or for example, you can frequently hear that "Why we must bother with rating agencies, they do what they do only by purpose of speculation" etc. The term "speculazione internazionale" is the most acclaimed lately.

    Practically only the two extremes of society, the more educated and/or active and the most weak and unemployed feel the crisis "viscerally" at this moment and by my opinion.

    The first are affraid of credit tightens (too much sectors are weak, the construction, small trade and so on) and debts and some craziness of eurozone ("not with you, nor without" topped with burocracy), the last are simply faced a big problem.

    So, i believe, that ALSO the personal wealth is helping to cope with all this mess.
    The grandparents who pay the rent, the entrepreneur who take the money from personal account and so on.
    The question is for HOW long?

    So I can tell you nothing new. Nothing that You don't know already.

    I add a little local particularity, the persons that I know, also whom were against the euro at the begining (or full of doubts, like me, I shared the Antonio Martino's ideas time ago, about crazy euro fixed exchange rate forever and ever) now don't see any exit and prefer to solve the problem, remaining within the euro area.
    Otherwise they told me, the shock could be enormous. At the same time, they can't figure out how it can works.
    Strange situation. No-win no-win.

    //sorry for my poor written english, i must improve…the latin of our day aka English is good to know well :-).
    // thanks for your blog, always a pleasure to read

  4. Wolf Richter says:

    Misplaced – thanks for your perspective, thoughts, and observations. This is very helpful. With your permission, I will quote your sad but powerful conclusion "Strange situation. No-win no-win" at the earliest possible occasion :)

    Your English is great. Don't worry. When I'm in Italy I try to get by with Spanish that I Italianize the best I can (doesn't work very well). German can be useful too. Someday I should learn Italian. It's a beautiful language.

  5. Dave says:

    That little "Starter Pack" brought back some memories. I have one or two of them as well (well, a-hem, speaking of memories, I will have to remember where I put them!). I also have a DM 10 commemorative coin somewhere. Anyway, thanks for the article!

  6. hidflect says:

    Misplaced made an ominous point I saw in Japan. Many, many people lived on the wealth of their parents either by direct financial input or by property inheritance. This has masked the true crash of Japan and is now running out as a "resource". In my street alone 3 "businesses" were shut down and the property demolished. I put businesses in inverted commas because they sold nothing. Ever. Just placeholders for cheap rent as the owners dwindled to their last coppers.

  7. Wolf Richter says:

    Dave – I hope you find them. That DM 10 coin should be awesome! Don't spend it, should you ever be able to :)

    Hidflect – that's an interesting observation. I haven't seen that among the Japanese I know (Tokyo area), but I have come across streets like that in the suburbs. I always thought, land price being the important (albeit declining) asset, that the generation that owned these businesses was too old to run them, and the younger generation was just waiting to sell the land once their parents died. I'll start paying more attention to this phenomenon. What city is your street in?

Comments are closed.