The European Parliament rapporteur is wrong about the digital euro

The European Parliament’s rapporteur on the digital euro file, centre-right MEP Fernando Navarrete, in a recent article, claimed to offer a “rational common ground” to discuss the proposal for a European Central Bank digital currency (CBDC).

However, his approach reflects a fear of transition: warning of financial instability, lost innovation, and privacy risks, while ignoring the costs of maintaining the status quo.

He also disregards the numerous calls by civil society, academics and research institutions for digital public money since the 2008 financial crisis.

A digital euro would give people universal access to safe electronic money, strengthen financial resilience, and deliver lower prices and better services. 

As with any political debate, arguments are informed by different perspectives on what kind of society we want.

Navarrete reasons from a competitive market economy perspective, where state action is justified only in cases of clear market failure. In this view, markets are better suited to meet social needs, with state intervention kept to a minimum.

But the EU treaties enshrine a highly competitive social market economy. In this perspective, markets drive prosperity, and the state upholds social cohesion and guarantees universal access to essential goods and services, including money and payments

Two types of 'money'

To understand the potential of the digital euro, the difference between the two types of money is key.

Cash, created by central banks, is public money.

Bank deposits, by contrast, are private money and created by commercial banks when they issue loans.

They are a claim on the bank to make payments on your behalf and give you cash if you ask for it. This distinction matters: if a bank fails, deposits are at risk, while cash remains safe.

Today, more than 85 percent of the money in circulation is private bank money. Declining public cash reflects not just digitalisation but also banks closing ‘unprofitable’ branches and ATMs.

Without a digital euro, people risk becoming entirely dependent on private money and private infrastructures. This dependency deepens exclusion: eight percent of eurozone residents lack a payment card, and around one-fifth lack either a card or a payment account, with higher rates among lower-income groups.

A digital public alternative ensures inclusion and strengthens resilience. 

Navarrete parrots the banking lobby’s claim that a digital euro would trigger bank runs and cripple lending.

But he ignores research showing the risk is low — or that CBDCs could even reduce it by giving policymakers real-time data to shore up weak banks early, lowering the incentive to run. 

The digital euro would offer a public alternative that increases competition, delivering better services at lower costs.

To appease banks, the ECB narrowed the digital euro’s ambition: restricting its use mainly to payments, not saving, with no interest and per-user holding caps.

These choices weakened the case for broad uptake as a safe public alternative to private bank money. But these limits are political, not technical. Gradually raising holding limits could strengthen financial resilience in the long run without destabilising banks. 

Leaning one way?

Unlike the ECB, Navarrete (of the centre-right European People's Party) is an elected representative whose duty is to weigh society’s broader interests.

Yet, since taking office in July 2024, 77 percent of Navarrete’s meetings on the digital euro have been with the private payment service providers and banks, and he has had only one meeting with an NGO.

Navarrete also argues that the digital euro would undermine competition.

But Europe’s banking sector is already plagued by insufficient competition, high prices, and poor service. When the ECB raised interest rates after 2022, European banks earned over €100bn annually on their deposits at the central bank, while passing almost nothing on to savers.

In Belgium, public frustration forced the government to issue a one-year state bond at higher rates, but the impact was short-lived.

In 2024, the Dutch authority for consumers and markets revealed that the Dutch savings market has features of a silent cartel.

The digital euro would offer a public alternative that increases competition, delivering better services at lower costs.

Navarrete’s privacy arguments lean heavily on fears, evoking surveillance scenarios popular in conspiracy circles.

The irony is that his alternative leaves people’s data with corporations that monetise it.

Privacy matters, and the ECB has repeatedly said it would never see people’s identities or spending habits. It only requires minimal, pseudonymised data to settle transactions, not much more than it already sees today.

The ECB has even proposed going further than the current proposal: cash-like anonymity for offline use and stronger privacy for low-value online payments.

As rapporteur, Navarrete could help ensure that high privacy safeguards are enshrined in the final law and design of the digital euro.

In the end, Navarrete’s analysis is less a “rational common ground” than a defence of the status quo.

Tellingly, he writes: “I am personally not eager to be part of the transitional generation, and I presume that is the case for most EU citizens.”

Yet the developments he cites — eroding trust and alternative visions of money — demonstrate that people are willing to upend systems that no longer serve them.

Civil society and academics have long argued for digital public money precisely because the status quo is not good enough. The digital euro is an opportunity to embrace transition and build a better, more inclusive and resilient monetary and financial system.

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