Before the EU parliamentary elections in June, the passage of the digital euro legislation looked like a slam dunk. Stefan Berger, the Rapporteur for the central bank digital currency (CBDC) legislation, has stepped down from that role given he is now skeptical of the digital euro, according to Politico. The report implies that Mr Berger’s views reflect his nationality as a German MEP rather than the broader European People’s Party (EPP).
Given the EPP is the largest group in parliament, if it switches to oppose the digital euro, the legislation could be in trouble. However, that’s less likely. When we reviewed the results of the European elections, we concluded that the parties supportive of the digital euro legislation represented 68% of parliamentary votes. That included the EPP, accounting for 26%.
The latest EU parliamentary coalition agreement gives the EPP the ability to side with more right wing groups on some issues. The question is whether the digital euro will be one of them.
When legislation is being drafted in Europe, a member of parliament (MEP) is appointed as Rapporteur to coordinate changes to drafts and discussions between the Commission, Parliament and Council. Stefan Berger was the Rapporteur for the digital euro before the June elections and was re-appointed. Politico reported that he has stepped aside to avoid suspicions he was slowing things down.
“It’s time for someone [who] is not coming from Germany and is not under suspicion that he wants to delay” the talks, Mr Berger told Politico. He also led the MiCA crypto regulation work.
Politico said Fernando Navarrete Rojas (EPP), a former central banker, is a potential replacement for Mr Berger. During a recent hearing he asked the ECB’s Piero Cipollone why the EU is proceeding when many other central banks have refocused on wholesale CBDC.
Digital euro objections
One concern about the digital euro is the impact on banks, especially smaller ones. In 2023 the Federal Association of German Community Banks (BVR) conducted a survey finding that if every depositor converted €3,000 to the digital euro, then only 56 out of 714 community banks would meet required liquidity buffers. €3,000 is the likely CBDC holding limit, although that’s up for debate. Research by the European Banking Federation found that a limit of that amount with a 40% takeup would increase bank funding costs by €8.8 billion.
Banks want to see a holding limit of €500 given the stated CBDC purpose is to be digital cash, not a bank replacement. This was Mr Berger’s concern that Politico mentioned.
Some consumer bodies want to see a higher holding limit because it’s more convenient and avoids sweeping money into and out of bank accounts.
These are not the only objections. Not only is the digital euro in competition with banks, but the bank regulator now becomes a competitor, a conflict of interest. Plus some of the costs of implementation are significant for banks, despite the limited potential upside.
With the private sector bearing high costs, it’s also unclear whether the digital euro will succeed given the tepid reception of retail CBDCs in other regions. That’s especially in China, where private digital payments are ubiquitous. Given payments are already surveilled in China, that’s not the main reticence. Consumers are satisfied with the way they already transact.
But privacy is an issue in Europe. During the first EU parliamentary debates, some MEPs raised privacy concerns and the potential for controlling spending on things that might be deemed to be environmentally unfriendly. With creeping restrictions on freedom of speech, these concerns are not without merit.
The last parliament appeared supportive
Despite these misgivings, the previous parliament seemed supportive of a digital alternative to cash, provided physical cash remains available. A first draft of the legislation was published last year. Before the elections, the European Committee on Civil Liberties and Justice (LIBE) voted overwhelmingly in favor of the latest digital euro report.
Meanwhile, digital euro legislation is running behind the technical and operational work which is currently in the preparation phase. At the end of 2025, the ECB’s Governing Council will decide whether to launch the CBDC. That can only happen if legislation is in place.
