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Did Sarkozy threaten to pull out of the euro?

Granted, this is the Guardian, quoting, El Pais, quoting anonymous sources, quoting Jose Luis Rodriguez Zapatero, quoting Nicolas Sarkozy, but it still has to raise some eybrows at the European Central Bank:

The startling threat was made at a Brussels summit of EU leaders last Friday, at which the deal to bail out Greece was agreed, according to a report in El País newspaper quoting Spanish Prime Minister José Luis Rodríguez Zapatero. Zapatero revealed details of the French threat at a closed-doors meeting of leaders from his Spanish Socialist Party on Wednesday.

Sarkozy demanded "a compromise from everyone to support Greece ... or France would reconsider its position in the euro," according to one source cited by El País. "Sarkozy went as far as banging his fist on the table and threatening to leave the euro," said one unnamed Socialist leader who was at the meeting with Zapatero. "That obliged Angela Merkel to bend and reach an agreement."

A different source who was at the meeting with Zapatero told El País that "France, Italy and Spain formed a common front against Germany, and Sarkozy threatened Merkel with a break in the traditional Franco-German axis."

El País also quotes Sarkozy as having said, according to another of those who met Zapatero, that "if at time like this, with all that is happening, Europe is not capable of a united response, then the euro makes no sense".

The euro fell to an 18-month low against the dollar today. 

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The world's most dangerous banknote

The Independent has a fascinating piece on British authorities' efforts to stamp out the €500 bill (about $627), a denomination apparently favored by organized crime: 

This is why a little-remarked-upon development in official policy on the denominations in which the euro is issued has sent shockwaves through the world of organised crime. Until last month, many British gangsters stored their spoils in the form of €500 notes. While £1m weighs 50kg in £20 notes, the same value weighs only 2.2kg in €500 notes. This has made life easier for a growing number of criminals, since the euro's introduction in 2002. Should you wish, for example, you can swallow €150,000 in €500 notes, or hide €20,000 of them a cigarette packet, while even £1m can be hidden quite easily in secret compartments in a suitcase.

However, fed up with abuse of the currency, Britain's Serious and Organised Crime Agency (Soca) has decided with the Treasury and Home Office to remove €500 notes from circulation in Britain. Soca's ban follows an investigation which revealed that 90 per cent of the €500 notes in this country are being used for criminal purposes. It's the latest of a number of high-denomination bank notes favoured by villains that have fallen out of favour. Richard Nixon halted the circulation of $10,000 bills in 1969 because of their association with organised crime; these days the 1,000 Swiss franc note, while rare, is another popular choice for those engaging in nefarious deeds, and the 1,000 Dutch guilder note was a black-market favourite before the introduction of the euro.

Soca's research showed that of the €500m worth of €500 notes brought to Britain each year, only 10 per cent were being used legitimately. The remaining €450m, it believes, are acquired by money-laundering operations before being passed on to criminals. "Soca has concluded that there is no credible legitimate use for the €500 note in the UK in the volumes currently supplied, and that easy access to them in the UK is a key enabler of criminal activity, allowing criminals operating here to move large volumes of cash effectively," a Soca spokesman said.

The €500 note's reputation is apparently so bad that it's earned the nickname, the  "Bin Laden", because people know they are out there but nobody ever sees one. There's growing pressure on the European central bank to do away with the bill entirely.

Matthew Yglesias had an interesting observation today that the ubiquity of ATMs and credit cards has largely made irrelevant one of the original great features of the euro, the fact that it allows business travelers and tourists to move from one country to another without changing money. I would imagine, however, that it still makes life much easier for those looking to transport large amounts of cash for illicit purposes.

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