Letter from the ECB to Gualtieri: “disproportionate” money back, Rome should have consulted us. Mef, unfounded findings

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The Italian government should have consulted the ECB before launching the cash-back program in compliance with the central bank’s powers, in particular those relating to means of payment. This is what we read in the letter that Yves Mersch, on the last day of his mandate on the ECB’s board of directors, sent to the Minister of Economy and Finance Roberto Gualtieri on December 14 and published today on the website of the European Community. The ECB – reads the letter – believes that the introduction of a cash back program for electronic payment instruments is disproportionate in light of the possible negative effect that this mechanism could have on the cash payment system and because it undermines the objective of a neutral approach towards the different means of payment available ”. In the letter, Mersch recalls that “in accordance with articles 127, paragraph 4, and 282, paragraph 5 of the Treaty on the Functioning of the European Union, recital 19 of Regulation (EC) no. 974/98 and in the second indent of Article 2 (1) of Council Decision 98/415 / EC28, national authorities must consult the ECB on the draft legislative provisions that fall within their competence, in particular those relating to means of payment “. The ECB would appreciate – the letter continues -” if the Italian authorities take due account of the above conclusions, fulfilling in future their obligation to consult the ECB, if necessary “.

Clear evidence is needed that the mechanism is effective in combating tax evasion

¨The ECB recognizes that incentivizing transactions through electronic payment instruments for the purchase of goods and services in order to combat tax evasion – the letter continues – can, in general, constitute a “public interest” that justifies the disincentive and the consequent limitation of the use of cash payments. However, such limitations or disincentives must respect the legal tender of euro banknotes enshrined in Article 128 (1) and Article 282 (3) of the Treaty. Therefore, it would be necessary to demonstrate that the restrictions affecting the legal tender of euro banknotes are effective in achieving the public purposes that are legitimately intended to be achieved by those restrictions. Therefore, there must be clear evidence that the cash back mechanism actually achieves the public objective of combating tax evasion. Again: “the Mef decree must respect EU law; in particular, any direct or indirect limitation or disincentive to cash payments must meet the requirements regarding the legal tender of the euro banknotes.

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Limitations in the use of cash proportional to the objectives

Direct or indirect limitations on cash payments, the ECB letter continues, must also be “proportionate” to the objectives pursued and must be limited to what is necessary to achieve these objectives, especially in light of the measures to which referred to the Mef decree could push adherents to compete for the largest number of transactions performed, which ultimately would favor adherents who perform a large number of transactions for limited amounts (that is, amounts that could otherwise be paid in currency). In particular, the special rebate of € 1,500 appears to be designed to incentivize the use of electronic payments for limited amounts. Therefore, any negative impact of the proposed rebate must be carefully weighed against the expected public benefits. When evaluating whether a limitation is proportionate, the negative impacts of the incentive in question should always be considered, as well as whether alternative measures can be taken that meet the relevant objective and have less adverse impacts.

Cash facilitates the inclusion of the entire population in the economy

“It must also be borne in mind – continues the letter signed by Mersch – that the possibility of paying in cash is still especially important for certain social groups that, for various legitimate reasons, prefer to use cash instead of other means of payment. Cash is also generally appreciated as a means of payment because, as a legal tender, it is widely accepted, fast, and makes it easy to control the payer’s expenses. It is also a means of payment that allows citizens to instantly settle a transaction and is the only central bank cash settlement method and at face value for which there is no legal possibility of imposing fees for its use. ¨. Finally – the letter concludes – cash payments facilitate the inclusion of the entire population in the economy by allowing any subject to settle any type of financial transaction in cash.

Mef: sources, ‘no doubts about repayment, unfounded ECB remarks’

– The money return letter sent to the Minister of Economy Roberto Gualtieri by the former member of the ECB’s executive committee, Yves Mersch, “does not raise concerns or doubts regarding the initiative of the Italian Government.” This is indicated by sources from the ministry of via XX Settembre. Mersch’s arguments – it is added – are purely formal (on the advisability of consulting the ECB on the provision) and, by their nature, are not binding. The formal observations expressed by Mersh, according to the same sources, do not appear to be well founded, since, as is well known, the Italian cashback does not in any way limit the use of cash or penalize those who use it, but only tends to incentivize electronic payment instruments.