A Slog investigation during the last twenty-four hours suggests that not only is the EU’s system of banknote printing open to easy abuse, Germany ordered a large consignment of plain banknote paper from its main supplier in 2010 – and printed considerably fewer euros than normal…in a eurozone where printing of euros generally was on the increase.
Following last week’s Slogpost about unauthorised printing of euros by the Bank of Greece, I received a tip-off from a Slogger in relation to companies in Europe printing euros officially – that is, on behalf of the ECB. Having followed this up, other equally disturbing things came to light: but the main finding is that it looks very likely Berlin took euro-exit seriously enough during 2010 to have the paper in readiness to convert to another currency….or revert to the Mark. And it my still harbour such feelings as ClubMed’s fiscal situation deteriorates.
Germany’s main banknote printer Giesecke & Devrient’s annual report appears anodyne enough at first sight. But its euro-printing division saw a dip in sales during 2010…when the number of euronotes in circulation went up by seven billion. As the Annual Report notes (my italics):
‘Following exceptional growth in recent years, the Banknote business unit suffered a drop in sales of EUR 143.9 million (16.0%) to EUR 752.6 million in 2010. This largely stemmed from the Printing division. The Paper division benefited from healthy business volumes on a par with the previous year….’
So the plain paper sales remained buoyant, but euronote volume fell 16% in a sector that grew by around 4%. I have since ascertained that a substantial proportion of the plain banknote paper was ordered by the BundesRepublik. The great majority of Germany’s euro stock is printed by G&D.
This suggests that Berlin is sitting on a huge stock of unprinted banknote quality paper….and has reduced the amount of its existing euros in circulation. That second fact is particularly surprising given that, since the euro’s launch, Germany has led the circulation growth every year: it has one of the lowest credit/bank card usage rates in the EU, and easily the highest consumption of cash for transactions.
Further, the Berlin government has another supplier, the Bundesdruckerei. It expanded into multiple security-related fields after being privatised in 2000; but then, during late 2008/ early 2009 – following Lehman’s demise and shortly after ClubMed’s problems became apparent – it was quietly renationalised. The official line was that this was done ‘to protect security policy interests’, but highly notable is the fact that the German government gazumped Giesicke & Devrient to secure control of the Bundesdruckerei. G&D complained to the media that it ‘had made a bid for Bundesdruckerei, and offered a very fair price’. But clearly, Angela Merkel did not want all her note-printing facilities to be in private hands. She is, after all, very keen on secrecy and control…having started life in the DDR.
One thing the euronote production market as a whole reveals is how little real control the ECB has on a day-to-day basis. It prints just under 8% of all the banknotes in circulation: over four notes in five are produced by the EU member State’s own suppliers – and in most cases, they are nationalised. What ties all the ‘peripherals’ together is that none of them produce euros for anyone else – and each country’s output has a different serial prefix to identify it. So it is relatively easy for the ECB to spot when unauthorised printing is taking place. Ergo, Mario Draghi must know that the Bank of Greece has been printing without permission. But he has chosen to do nothing about it.
Yet the ECB itself is not only an independent body (as it should be) it is also answerable to nobody at all – which is a different matter entirely. On 25 October 2005, for example, a majority of MEPs supported a motion calling on the European Commission and the European Central Bank to recognise the definite need for the introduction of €1 and €2 banknotes. Europe’s Central Bank is not directly answerable to the Parliament or the Commission, and so Jean-Claude Trichet simply ignored the motion. In the banks v democracy fight, the banks always win.
As an EU citizen (thankfully uninvolved in the eurozone) I find all the things emerging from this very brief initial delve into euro production most disturbing. Last November the Max Keiser site focused on ECB reform as the thing most likely to evoke a German departure from the ezone. Since then, ECB boss Mario Draghi has manoeuvred Board membership at the bank skilfully to reduce German influence still further.
In the same month, Chancellor Merkel’s Christian Democratic Union party voted to allow euro states to quit the currency area, endorsing the prospect of a move not permitted under euro rules. That was a statement of intent, not the passing of a law – but it does show pretty clearly that the option is there should Berlin feel the need.
Now we learn that Berlin has a banknote paper stockpile, full control over a printer based in Berlin, is running down its euro supplies, and is ken to make euro-exit easier. As The Slog’s Bankfurt Maulwurf has always maintained, Germany has every angle covered. Yet again, digging into the facts behind the spin proves him right.
We still have to consider as well why Signor Draghi is so casual about Greek behaviour at its central bank. Or indeed why he issued worthless non-cash bonds to bail out Athens. Or why the undermining of Greece continues in European media: this morning Greek news website Ekathemerini leads with yet another leak suggesting there are ‘significant risks’ that the country might fail to bring down its debt because ‘the authorities may not be able to implement reforms at the pace envisioned.’ This came from the existing private creditors – aka, the US via the AP wire.
Earlier in the week, The Slog led with the revelation that Germany’s banking community had told Angela Merkel, “Either Greece must be amputated, or we must leave the eurozone”. I am rapidly coming to the conclusion that both possibilities are still in play….and as always, the Fuhrerine in Berlin is waiting for events to present a clearer picture. As I noted in the earlier post this week, opinion is moving away from the German exit solution: but a post-election repudiation of the Brussels Accord in Greece, and a collapse in Spain and Portugal, would make it the hot favourite.
Either way, as always, Germany is ready to deal with the situation – it has alles in ordnung, and at one or other of its printers, Berlin can feel secure about the certainty of alles klar.