This Europe: New currency but old habits for the Spanish hoarders

Spaniards are hoarding black money again. Their liking for undeclared funds became clear late last year when, faced with the imminent arrival of the euro, they plunged into an orgy of spending before their pesetas became obsolete. They bought jewels, houses, facelifts, fancy cars – anything to soak up old currency.

The Bank of Spain now reckons people are illicitly salting away euros as dinero negro, causing a run on the highest denomination €500 note, whose circulation has soared by 73 per cent in six months. Demand for €200 and €100 notes has also accelerated, by 45 per cent and 55 per cent.

Analysts conclude that with the spending spree exhausted, households are saving again. Not all may be hidden from the taxman, but experts reckon most constitutes "black money".

The value of notes in circulation with denominations higher than €50 amounts to €42bn. This far exceeds the previous quantity of 10,000-peseta notes – the denomination favoured by illicit hoarders – which never topped the equivalent of €35bn. Bankers are astonished by the boom in popularity of the €500 note, worth £320 – eight times the value of the top-whack peseta note.

Experts say the figures confirm estimates that undeclared money accounts for 20 per cent of the Spanish economy, way above the EU average. That will come as no surprise to the population as a whole: before the introduction of the euro, Spain's second-largest bank, BBVA, estimated that $8.5bn in cash could come out of hiding. Many Spaniards feared tighter controls when the euro came into force on 1 January.

The pre-euro buying spree notably involved a sudden surge in house-buying, in which buyer and seller would do a little business on the side. The official price is reported to the tax authorities. But the real price is higher. The difference would be paid in black money.