Why Europeans Are Keeping Emergency Cash: The Cyber and Infrastructure Risk Behind the ECB’s €1.6tn Paradox

That is not the pattern of a conventional bank run. It is closer to household-level insurance.

Cash as infrastructure insurance

The distinction matters because the financial system is not facing a broad loss of confidence in banks. Instead, households are beginning to price a different kind of risk: the possibility that the systems connecting them to their money could temporarily stop functioning.

Austria, Finland, Germany, Sweden and the Netherlands have all included cash in public preparedness advice. Households have been encouraged to keep roughly €70–€100 available alongside enough food, water and other basic supplies to survive the first 72 hours of a disruption. The recommendations also include items such as battery- or transistor-powered radios.

The logic is straightforward. A bank account can remain perfectly solvent while being temporarily inaccessible.

A prolonged electricity outage can disable payment terminals and ATMs. A telecommunications failure can sever connections between customers, banks and payment networks. A cyberattack can disrupt digital services without threatening the underlying deposits themselves.

That distinction is becoming more important as Europe's security environment deteriorates.

The continent has experienced severe wildfires, floods and storms capable of damaging local power and telecommunications networks. At the same time, cyber incidents have shown that digital disruption does not require physical destruction of infrastructure. A major attack on UK retailer Marks & Spencer disabled online ordering for weeks, while ransomware operations have targeted public institutions and critical entities in Romania and Latvia.

The result is a new conception of resilience in which a small amount of physical currency can provide something a digital account cannot: a payment mechanism that does not depend on electricity, internet access or an operating online service.

The security dimension

Europe's cash debate is therefore moving beyond banking policy.

Western intelligence agencies and European cybersecurity bodies have warned of state-backed campaigns aimed at government, defence and energy infrastructure. Russian-linked groups including Turla and Laundry Bear have been associated with espionage and attempts to prepare access to European networks. CERT-EU and other authorities have also highlighted operations linked to North Korea and China, including campaigns directed at European defence manufacturers and university systems.

The individual techniques matter less to households than their cumulative effect.

Zero-click phishing, ransomware, stolen credentials and attacks on public registries are all manifestations of the same underlying vulnerability: highly connected systems can be disrupted remotely. A payment economy built almost entirely around those systems therefore carries a different kind of systemic exposure from a cash-based one.

Cash does not solve the problem. It cannot keep hospitals operating, restore electricity or protect an energy grid from sabotage. But it provides redundancy at the final point of the economic chain: the ability to exchange value when the electronic layer is unavailable.

That is why the growth in banknote holdings is better understood as a security signal than as a monetary one.

From efficiency to redundancy

For much of the digitalisation of European finance, the direction of travel was clear. Banks could reduce branch networks and cash-handling costs; consumers could make payments instantly; merchants could rely on increasingly sophisticated electronic infrastructure.

The economic case for this model was compelling because redundancy looked expensive and unnecessary when systems were assumed to remain available.

That assumption is becoming harder to sustain.

Europe is now confronting several sources of disruption at once: cyber operations, physical infrastructure failures, extreme weather and the possibility of hostile interference with critical systems. None necessarily needs to cause a prolonged national crisis. A series of localised failures can be enough to expose the weakness of a system designed around continuous digital availability.

This is changing the status of cash.

A payment method that once appeared inefficient is being reconsidered as a resilience asset. ECB officials and academic experts, including Professor Olive McCarthy of University College Cork, have argued for protecting the physical infrastructure that makes cash usable, including ATMs and bank branches.

The policy challenge is that resilience has a cost.

If consumers increasingly pay digitally, maintaining extensive ATM networks, cash distribution systems and physical branches becomes commercially harder to justify. Private operators have an incentive to concentrate or remove infrastructure that generates insufficient returns.

From a narrow efficiency perspective, that makes sense.

From a civil-defence perspective, it can create a vulnerability.

The political economy of a cashless Europe

This is where the debate over cash becomes more complicated than a choice between old and new payment technologies.

Central banks and governments are being pushed towards preserving infrastructure that market forces might otherwise eliminate. Legislative efforts backed by central banks seek to protect access to cash, including the physical ATM network and the ability to use banknotes.

That amounts to a significant shift in how financial infrastructure is defined.

An ATM is no longer merely a commercial service point. In a sufficiently disrupted environment, it becomes part of the infrastructure that allows households to function. The same applies to the physical distribution and storage systems behind banknotes.

Commercial banks will bear part of the cost. Digital-only payment providers face a less favourable regulatory environment if governments insist that electronic payments cannot become the sole option. But the alternative is to accept a system in which a major digital disruption could simultaneously remove access to both payments and cash.

The groups with the most to lose from that outcome are not necessarily affluent consumers with multiple bank accounts and smartphones. Elderly people, low-income households and those less comfortable with digital services are particularly exposed when physical access to money disappears.

Cash therefore occupies an unusual position in the European economy. Its everyday use can continue to decline while its strategic value increases.

Sweden and Germany, the same precaution for different reasons

The change is particularly striking in Europe's most digitised economies.

Sweden and the Netherlands have moved far towards electronic payments, making the prospect of losing digital infrastructure more consequential. Germany and Austria, meanwhile, have stronger traditions of cash use and financial preparedness. Yet all four are represented in the public guidance urging households to retain physical currency for emergencies.

The convergence is revealing.

The argument for keeping cash no longer depends entirely on whether people like paying with banknotes. It depends on whether societies believe digital infrastructure can be assumed to function under every circumstance.

That is a much broader question.

The 72-hour preparedness model effectively brings civil defence into the household's financial routine. A modest cash reserve sits alongside water, food and communications equipment because all are intended to bridge the initial period after a major disruption, before normal infrastructure can be restored.

The irony is that Europe's most advanced digital economies may have the strongest reason to preserve the analogue fallback they have spent decades making less relevant.

The cost of assuming the lights stay on

The rising stock of euro banknotes does not signal a banking panic. If anything, its coexistence with falling cash usage points in the opposite direction: people are accumulating currency without necessarily intending to spend it.

What is changing is the meaning of that stock.

Europe's financial system was built for speed, connectivity and efficiency. The emerging resilience model asks a different question: what happens when connectivity disappears?

The answer increasingly involves redundancy - maintaining physical alternatives even when they are more expensive and less efficient in normal conditions.

That creates an uncomfortable policy choice. Governments can allow the cash network to shrink in line with consumer demand and accept greater dependence on digital infrastructure, or they can preserve a physical payment system that may spend most of its time underused but becomes indispensable when the digital system fails.

In a Europe facing cyber pressure, infrastructure disruption and increasingly severe physical shocks, the second option is becoming harder to dismiss as inefficient.