October 2008 | Demand soars for euro notes

Demand for euro banknotes has risen sharply in the past two weeks, said the European Central Bank on Tuesday as it pumped large amounts of extra liquidity into eurozone financial markets.

The value of banknotes in circulation leapt by almost €19bn ($26bn, £15bn) last week to €712bn.

In percentage terms the 2.73 per cent week-on-week increase was the largest since the end of 2002, shortly after euro notes and coins were introduced. It came on top of an €11.5bn increase in the value of banknotes in circulation during the previous week.

“It clearly could be people withdrawing money out of current accounts,” said Gilles Moec, European economist at Bank of America.

He stressed that the increase was “not surprising” given the amount of media attention to the financial crisis.

The value of euro notes in circulation globally had risen steadily since the ­currency’s launch and in 2006 overtook the value of dollar bills in circulation – reflecting the stronger preference of Europeans to hold cash and to use it for transactions.

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