- The Washington Times - Friday, November 30, 2001

MADRID Mattresses, safes and freezers are disgorging wads of cash as Spaniards rush to spend secretly hoarded pesetas before the European Union's new single currency renders the Spanish bills worthless.
Real estate, cars, jewelry and other big-ticket items top the shopping list for people shedding money stashed away over the years.
Reflecting Spaniards' picaresque handling of money, much of the hidden cash known as "dinero negro," or black money comes from real estate deals in which part of the payment was made off the record in order to evade taxes.
Other sources include money laundered by drug traffickers and profits kept concealed by bar owners and small-time retailers.
They are all racing against the clock because the European Union's euro currency will replace the peseta and 10 other national currencies on Jan. 1. In Spain, euros and pesetas will coexist for two months, but come March, the peseta will cease to be legal tender.
Since banks trading pesetas for euros are supposed to report transactions over $30,000, few Spaniards want to simply exchange the money legally as tax authorities could get curious about their piles of cash.
So stealth and speed are essential in disposing of rogue pesetas. The downturn in the world's economy, exacerbated by the September 11 terror attacks in the United States, is not slowing the spending since black money must be used now or it will simply disappear.
No one knows exactly how much stashed cash is seeping back into the economy. The Bank of Spain has no recent figure, but it estimated several years ago that Spaniards held $19 billion in undeclared cash. By one measure, that's more than a third of Spain's money supply.
"We don't have much of a taxpaying mentality here," said bank spokesman Jose Luis Pellicer.
Other EU countries report similar cash-flow oddities. In France, an estimated $140 million in hoarded cash is returning to circulation each week. Germany is carrying out spot checks of cars coming from Switzerland and Luxembourg, which are popular tax havens for Germans.
In Spain, so much cash has crawled out of the woodwork over the past few years that the Spanish central bank printed 10 percent fewer bills than expected in 2001.
"It's all showing up in sales of apartments and cars," Bank of Spain Governor Jaime Caruana told El Mundo newspaper. "That said, it's difficult to evaluate whether this is legitimate money or black money."
Housing prices also have risen steadily for three years jumping 15 percent just from January to June and economists and real estate agents say the increase is largely due to people laundering black pesetas.
Much of the money gravitating toward real estate stems from earlier, slightly shady deals in the same sector.
The deals work like this: Buyer and seller agree on a price but put a lower amount on the deed. The difference often 20 percent of the actual price, but sometimes as much as half is paid in cash. The seller pays less in capital gains tax while the buyer pays less in sales tax.
Notaries who witness real estate closings are said to set aside rooms for the illegal cash to change hands discreetly. A poll by El Mundo found 96 percent of Spaniards would be willing to fudge a deed price.
The ABC newspaper reported that in one deal a buyer showed up with $124,000 worth of pesetas in stacks of cash frozen solid from being kept years in a freezer. Settlement was delayed for hours until the money thawed and could be counted.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide