Live well without being a millionaire: is it possible?

Can we live well without having to mortgage our lives and have a promising future without financial headaches? Is it possible to live like a millionaire without having a large income?

The first thing you must do to know the reality of this is search the Internet for the name of this financial journalist: Michelle McGagh. Homework done? Let’s move on. As we can see, in 2015, this English journalist decided to stop spending money for a whole year. After a year of extreme savings, without even spending money on transportation or restaurants, she managed to save more than £20,000 in a year, almost the amount she needed to buy a new car.

With the example above, we can see that it is possible to live well having a more austere life, without great luxuries or ostentation. There is also another very fashionable method called FIRE (Financial Independence, Retire Early) movement. But what is this movement?

A movement that promotes early retirement

The main idea of this movement is to save as much money as possible so that we can retire before the age of fifty. This lifestyle is based on living freely and leading a life without consumerism, getting rid of your expenses as soon as possible, leading a do-it-yourself life, controlling personal expenses, making a smart use of your investments, being practical, and above all, having a job we like. The profile of this curious movement is increasingly seen among young people who want to get out of the wheel to which the world is tied, young people who want to retire early so they can enjoy economic peace before they turn fifty by means of this peculiar movement.

Can you live well without being a millionaire?

The answer to this question is always focused on what we want to generate in life. It always depends on the lifestyle we want or how good a use we want to make of our economy. Money can have a very different meaning depending on how we use it. If a person earns an exorbitant salary, in no way will that mean that person is leading a life as a millionaire after some time. How many times have we read in press articles about famous actors and actresses who, after earning millions of dollars in their films, have been left with no money at all?

There is also the fact that the amount of millions a person has does not prove she or he is fully happy. Bhutan is the happiest country in the world, and this is proven, because this country, an independent South Asian kingdom and state, calculates the gross national happiness index, which measures the quality of life of the country according to custom preservation, environmental care, and economic growth.

The internet is full of blogs discussing whether money gives happiness. Money clearly helps us lead a calmer life, but that does not mean money brings us happiness. The Covid-19 pandemic has also accelerated social inequalities among the population. The world needs to reinvent itself and teach happiness in schools. Humanity has put on its face mask, behind which hides millions of eyes in need of a smile or a hug. Maybe we need to teach more how to live well with the necessary, than the obsession with becoming millionaires to solve our economic problems.

There is a sage who says the world is full of money, that we make good use of it, and then let it go free again as it was before it came to our hands. Having a bank account full of money does not make us happier or freer, and living well is linked to our way of being and knowing the world around us. As Bob Marley put it, “money can’t buy life.”

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However, it seems obvious that in order to learn how to manage our money, it is essential that we have earned it first. Diversifying our earnings is a strategy that can shield us against a possible recession or an unforeseen event. At 11Onze we have compiled three basic tips on how to do this.

In times of uncertainty it is key to know the answers to: how to save, how to grow savings and how to control spending. We will hardly be experts in finding answers to all three questions at the same time, but if we understand the concepts behind each of them, we have a much better chance of managing our money properly. Not only will we learn to cover the basic needs, but we will know how to enjoy them, and we will be very clear about when we should do without those that are not as basic as we thought.

Saving: at least 10% of income

It is often said that saving is the main basis for financial success. Having money in savings is what gives us the ability to respond to unforeseen situations – be it incapacity due to illness or unexpected charges, starting a business or going back to school. But it is important not to confuse saving with investing: while the former gives us peace of mind, even in times of global economic crisis, investing can make our savings multiply, but it can also be a source of headaches and cause us to lose our liquidity.

One dilemma we may face is whether to pay off debt or save. It all depends on the interest rate of the debt. In high-interest cases, such as credit card debt, it is generally preferable to pay off the debt to zero before considering saving. But in cases where the interest on the debt is low, such as with a mortgage or even a personal loan, it makes sense to save and at the same time pay off the debt slowly.

Slow growth, low risk, and the other way around

A savings account has been the most traditional way to grow our money, especially for the more conservative and risk-averse. However, with relatively low interest rates and inflation visiting us much more often than desirable, other forms of investment are gaining ground, especially in the face of an increasingly financially literate clientele with a relatively higher purchasing power than previous generations.

At this point, the range of investment products on offer is wide and varied, with different levels of risk. Everyone must be aware of their financial knowledge and, above all, of the amount of money they are prepared to risk and lose, especially if the expectation of growth is high and in the short term. It should be borne in mind that an investment manager can be a very good option when it comes to choosing a financial product that will substantially improve the profitability of one’s savings.

Spending: need vs. want

Of course, we will not save everything we earn, but we must distinguish between two types of expenses:

• Necessities. Here we count expenses on the basics we need to live, such as food, accommodation, electricity supplies, water, public transport, among others.
• More superfluous wants and products. By elimination, we include everything that is not strictly necessary. This would include impulse purchases, luxury items, leisure travel, etc.

Making this distinction does not imply that we cannot spend money on things we want, but do not necessarily need. Desire and actions that do not have a purely practical purpose are part of the human condition. This is a fact. Therefore, we must also allow ourselves these expenses, provided we adhere to a pre-set budget, whether weekly or monthly.

11Onze is the community fintech of Catalonia. Open an account by downloading the app El Canut for Android or iOS and join the revolution!

Les criptomonedes han revolucionat el sistema financer mundial, però com tota nova tecnologia genera moltes preguntes. Hem preparat un petit glossari dels termes bàsics que hauries d’entendre per a iniciar-te en el món de les criptodivises. 

Les criptomonedes, també conegudes com a criptodivises o monedes digitals, són una divisa alternativa que es pot definir com un actiu digital que fa servir un xifratge criptogràfic per garantir la seva titularitat, assegurar la integritat de les transaccions, i controlar la creació d’unitats addicionals. Dit això, hi ha uns conceptes clau que cal tenir clars a l’hora d’entendre el funcionament de les criptomonedes.

Blockchain

El ‘blockchain’, o cadena de blocs en català, és una tecnologia que permet fer transaccions entre dues o més persones sense la necessitat d’intermediaris. Ve a ser el llibre de comptabilitat on es guarden totes les operacions distribuïdes en ordinadors, que poden estar en qualsevol part del món, interconnectats a través d’una xarxa Peer-To Peer (P2P), d’igual a igual, i sense la necessitat d’un servidor central. Es tracta d’una tecnologia que facilita la descentralització d’aplicacions financeres i qualsevol altre registre digital. A més, es considera molt segura perquè només es pot modificar el registre de tot el que ha passat a la xarxa si totes les parts hi estan d’acord.

Mineria

Mentre que en el sistema monetari tradicional, els Governs imprimeixen diners en funció de les seves necessitats, la creació monetària en l’ecosistema de les criptomonedes més populars, com per exemple el Bitcoin, està limitada. A més, les criptomonedes no s’emeten i queden disponibles per a tothom, es posen en circulació en blocs encriptats que han de ser desxifrats. D’aquí ve el concepte de la mineria de les criptomonedes, un procés computacional mitjançant el qual un conjunt d’ordinadors, els miners connectats a la xarxa, reben un nou algoritme per a resoldre un problema matemàtic, que, un cop solucionat, es recompensa amb una comissió per l’emissió d’una nova unitat de la criptomoneda, que s’afegeix a la cadena de blocs.

Moneders

Els moneders de criptomonedes o ‘wallets’ són moneders virtuals que ens permeten gestionar les nostres criptomonedes. La principal diferència amb altres moneders virtuals que podem trobar a molts bancs resideix en la seguretat que ofereix el seu programari, permetent un control absolut de les claus públiques i privades per signar transaccions i operacions executades amb criptomonedes a través de la xarxa blockchain. L’ús d’aquests moneders és indispensable a l’hora d’administrar monedes digitals basades en la criptografia, i que no existeixen en el món físic.

Staking i Hodling

El concepte de ‘staking’ consisteix en adquirir criptomonedes i mantenir-les bloquejades en un moneder amb la finalitat de donar suport a la seguretat i funcionament de la cadena de blocs. A canvi rebrem un guany, o recompensa, en forma de criptomonedes addicionals. El ‘hodl’ és un procés similar, però en aquest cas els actius no estan bloquejats i els pots utilitzar lliurement. Es tracta d’una opció que fan servir inversors que volen mantenir els seus actius durant un llarg període de temps amb l’esperança que es revalorin.

Tokens

Tot i que els conceptes de token i criptomoneda es poden considerar com a sinònims, la distinció està en el fet que les criptomonedes tenen una cadena de blocs pròpia, mentre que els tokens s’emeten en una altra cadena de blocs, com per exemple Ethereum. Un token és una unitat de valor emesa per una persona o per una empresa privada amb la qual pots representar diferents objectes dins d’una cadena de blocs. És un valor transferible dins de la xarxa de blockchain, però que no té un valor real fora d’ella, semblant al que ens passaria si tinguéssim fitxes d’un casino o punts d’una aerolínia. Per tant, un token pot tenir diferents finalitats: des de donar accés a més funcionalitats en un joc en línia, a poder ser intercanviat per objectes reals, col·leccionisme, participar en un esdeveniment …

11Onze és la fintech comunitària de Catalunya. Obre un compte descarregant la super app El Canut per Android o iOS. Uneix-te a la revolució!

Horror! La televisió no funciona perquè un dels teus fills estava jugant i ha llançat alguna cosa contra la pantalla o, fins i tot pitjor, l’ha tirat al terra. Es tracta d’accidents d’allò més habituals quan hi ha nens petits a casa. La teva assegurança de llar es faria càrrec de la reparació en aquesta mena d’accidents?

Els nens es passen el dia jugant i és habitual que en un moment o un altre acabin trencant alguna cosa a casa. La televisió és un dels objectes de valor que amb més facilitat pateix les conseqüències de les seves entremaliadures, especialment ara que són més lleugeres que mai i es poden caure amb facilitat en cas de rebre un cop.

Les assegurances de llar inclouen dins de la cobertura de responsabilitat civil els danys que els nens puguin provocar a tercers dins o fora de casa, ja que es dona per fet que es produeixen per accident. Però elements com la nostra pantalla de televisió no entren en la categoria de danys a tercers, sinó que són danys propis, per la qual cosa normalment estan exclosos.

Quines reparacions solen cobrir les assegurances de llar?

Si no tenim contractades cobertures addicionals, els danys que normalment cobreix una assegurança de llar són els provocats per l’aigua, els fenòmens atmosfèrics i els derivats d’un robatori. També sol incloure’s la reparació d’electrodomèstics en cas de sobrecàrrega de tensió, tot i que en aquests casos normalment s’estableix un límit d’antiguitat per a l’electrodomèstic.

A més, les assegurances de llar solen incloure la reparació o restitució de vidres trencats i fins i tot sanitaris, però poques vegades fan referència a elements com les pantalles de les televisions. I un televisor trencat pot convertir-se en un gran problema perquè la reparació pot ser més o menys costosa en funció de quines peces hagin sofert danys.

La conveniència d’una cobertura específica

Com més val prevenir que curar, quan es tenen fills petits és aconsellable contractar una assegurança que cobreixi qualsevol dany que es produeixi en la llar per accident. Això sí que ens protegiria en cas que algun dels nostres fills trenqués la televisió mentre juga, o fins i tot si es despengés una làmpada i causés danys en un moble o algun altre element.

De tota manera, cal tenir en compte que aquest tipus de cobertures no ens protegeixen absolutament de tot. Sempre hi ha límits i béns que estan exclosos, com sol passar amb les ulleres. Per això, és necessari llegir amb atenció la pòlissa abans de contractar-la per comprovar quins danys es poden reclamar i quins no.

Què fer en cas de sinistre?

Si una malifeta dels nostres fills ha provocat algun desperfecte a casa, convé contactar amb la companyia d’assegurances el més aviat possible per comunicar el sinistre. L’habitual és que les companyies atorguin als seus assegurats un termini màxim de set dies per fer-ho des que en tenen coneixement, tot i que en algunes pòlisses aquest termini s’amplia.

Quan parlem amb l’operador, haurem d’explicar-li què és el que ha succeït i quines són les conseqüències de l’accident. Qui ens atengui ens confirmarà si aquest desperfecte està o no cobert per la pòlissa. En cas que ho estigui, es desplaçarà al nostre domicili un pèrit per examinar els danys i emetrà un dictamen amb la solució adequada. En el cas de la televisió, això podria implicar la reparació o el canvi per una nova.

Si vols conèixer una assegurança justa per a la teva llar i per a la societat, descobreix 11Onze Segurs.

The multiple bank failures that took place during the 2008 financial crisis familiarised us with the concept of a bailout, a mechanism whereby a government uses public money to rescue financial institutions. However, there is another, less well-known option where shareholders, creditors, and depositors can take over the losses.

Big banks have become used to playing Russian roulette with money that is not theirs. If business is good, they keep the profits, while if it goes badly, the losses are socialised at the taxpayer’s expense. This is a globalised phenomenon that has been repeated over time and became evident with the multiple bank bailouts and financial sector restructuring that took place during the 2008 financial crisis.

Thus, to avoid the collapse of the banking system, the first option for many countries was to bail out ailing institutions or, in other words, use taxpayer’s money to cover the red numbers caused by the irresponsible financial management of the bankrupt institutions’ management teams.

In the case of Spain, major international organisations estimate the costs of the bank bailout at 6% of GDP. More than 64 billion euros in public money was injected into the banks, much of which has already been written off after the banks have only returned a tiny amount to taxpayers.

External bailout vs. internal recapitalisation

The two basic models currently used by the financial system to help struggling banks are the bailout or external rescue and the bail-in or internal recapitalisation. While in a bailout the state, i.e. the public as a whole, bears the cost of recapitalisation, in the case of a bail-in the losses are borne by shareholders, creditors and ultimately depositors, as happened in Cyprus in 2013. The concept of bail-in is based on the notion that if the bank needs to rebalance its balance sheet, it must first use its own capital.

Since January 2016, a bail-in system has been in force in the European Union. According to this resolution mechanism, shareholders receive the first blow. If this does not stabilise the bank, subordinated creditors take over. Next in line are the holders of senior bonds and, finally, uninsured depositors, i.e. those with more than 100,000 euros in their accounts, with preference given to the deposits of large companies over those of households and SMEs, while small depositors remain unaffected.

It is therefore a mechanism designed to minimise the possibility that the costs of resolving a non-viable institution will be borne by taxpayers, while at the same time ensuring that systemically important institutions are resolved without endangering financial stability.

Can the bank or the State take my savings in case of bail-in or bankruptcy?

Yes, if you have more than €100,000. If you have less than €100,000, you will be excluded from the bail-in and will be covered by the Deposit Guarantee Fund in case of bankruptcy. This body guarantees the return of money from savings accounts, current accounts and fixed-term deposits.

Let us remember that the FGD guarantees 100,000 euros per depositor and institution. Therefore, to insure higher amounts, it is advisable to have the capital distributed among different entities, without exceeding 100,000 euros in any one of them. Alternatively, if an account with 200,000 euros is shared by two people, each of them would have 100,000 euros insured.

Another option is to open a current account with a fintech such as 11Onze, which operates through an Electronic Money Institution (EMI) and is required by law to insure 100% of its customers’ deposits in the event of bankruptcy, regardless of the amount.

Are there any real examples of bail-in?

In Spain, on 7 June 2017, Banco Popular was the first Spanish bank to be bailed-in under the European Union’s new framework for bank resolution. Shareholders and subordinated debt holders lost their investment, and the bank was sold for one euro to Banco Santander, thus avoiding the use of public money. In this case, depositors, even if they had more than 100,000 euros in savings, did not lose their money.

The bank bailout in Greece in 2012 led to the liquidation of Laiki Bank and the restructuring of the Bank of Cyprus through a bail-in. In this case, customers with up to €100,000 in savings did not lose their money, but big depositors lost a large part of their savings or, in some cases, this money was converted into shares.

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The cycle of financial crises in recent decades has highlighted the limitations of the current models of banking supervision in ensuring the solvency of banks, the stability of the economy and confidence in the financial system.

Banks play a fundamental role in the economy, therefore good banking supervision is a critical element in maintaining the soundness and integrity of a country’s financial system. Yet, time and again, we see how regulators are unable to prevent the mismanagement of these institutions from having disastrous consequences for the economy.

Essentially, banking supervision involves the regulation and monitoring of banks’ activities by the competent authorities. These supervisory bodies have to ensure that banks comply with regulations and adequately manage the risks inherent in their operations to ensure their solvency.

Yet the promiscuous relationship between the banking and political classes has facilitated deregulation and ineffective supervision of the financial sector, leading to risky and irresponsible practices by the monopolies that control the market. This reveals an unwillingness to serve the public interest that often results in economic devastation that taxpayers end up paying for by bailing out banks with public money.

When banking supervisors fail to do their job

The 2008 financial crisis originated from the 2006 housing bubble in the United States. A credit boom was accompanied by excessive leverage built up by the banking sector fuelled by cheap credit and lax regulation.

Financial institutions offered subprime mortgage loans to people with questionable financial solvency, granting credit to customers with low incomes or without adequate verification of their ability to pay. At the same time, financial derivatives played a key role in amplifying the crisis. These investments were initially considered safe and low-risk, as credit rating agencies gave them a good rating.

The report of a commission of enquiry set up to investigate the crisis’s causes highlighted banks’ excessive risk-taking and negligence by financial regulators. In particular, it criticised the reduction and failure of financial regulation by the Federal Reserve during Alan Greenspan’s tenure.

Deregulation and lack of oversight, however, were not new, as it was the cornerstone of “Reaganomics” during the 1980s. President Reagan’s administration had laid the foundations that inspired the policies put in place by his successors and that culminated in the 2008 financial crisis.

Auditors call ECB banking supervision into question

The collapse of Credit Suisse, accompanied by the failure of Silicon Valley Bank and Signature Bank, raised the spectre of Lehman Brothers and triggered panic in the markets. Governments and regulatory agencies assured us that we did not have to worry about the safety of our savings and the stability of the financial sector because, despite appearances, they had done their job.

Well, it turns out that no, they haven’t done their job this time either. A report published by the European Court of Auditors has called into question the ECB’s banking supervision, warning that the capital requirements for the riskiest banks are insufficient and that supervision was not stepped up for banks with persistent credit management problems. The report notes that the ECB “does not use its supervisory tools and powers effectively to ensure that identified risks are fully covered”.

As with Lehman Brothers, Credit Suisse was given a clean bill of health by regulators and rating agencies shortly before the collapse. In fact, DBRS Morningstar was the first global rating agency to cut Credit Suisse’s credit rating, less than a day after the Swiss central bank was forced to bail out the financial institution. In short, yet another failure on the part of the supervisors and rating agencies that are supposed to look after our interests.

Once again, it seems that the interests of the banks and a select minority have priority over the will to serve the public interest and that the so-called supervisors simply serve to perpetuate the usury of the powers that be that justify their existence. We have all heard Albert Einstein’s famous phrase: “Insanity is doing the same thing over and over again expecting different results”, all, except those in charge of banking supervision, apparently.

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Despite the fact that three out of every four homes have home insurance, the majority of homeowners do not know the real scope of their insurance cover, especially with regard to damage and small repairs. Here are some of the coverages, both included and optional, that few take advantages of.

The first thing to know is that not all insurance policies offer the same coverage. Before taking out an insurance policy, it is important to read the small print to avoid last-minute surprises in the event of an incident. Likewise, some repair covers may be optional or subject to limitations. Therefore, compare before taking out insurance and, if necessary, add a complementary cover that suits your needs.

Water damage

It happens more often than we think, according to ICEA data they account for more than a third of household claims and, if we do not have insurance, they can entail a considerable financial loss.

As a general rule, damage caused by water leaks, spills, or leaks have a basic coverage with limitations. For example, there are policies that exclude the repair of taps, stopcocks, boilers, radiators or electrical appliances, when they have been the cause of the loss.

Damage caused by burst pipes and drains, inside and outside the home, as well as damage to electrical appliances connected to these pipes, are normally covered, but you should bear in mind that covering the cost of fixing the cause of the water leak (for example, a pipe) may be your responsibility, although some companies cover this cost.

Electrical damage

Electrical damage is considered to be any damage caused by an electrical problem, which can be caused by a lightning strike, a power surge, short circuits or other electrical faults.

A power failure or system overload can cause serious damage. Therefore, it is important to ensure that the damages derived from an electrical issue are included in our home insurance, since we will have to contract this specific coverage in some cases. Even so, there are small expenses that may also be covered by some insurances, such as, for example, refrigerated food spoiled when the refrigerator stops working.

In general, insurance policies cover damage to fixed elements that form part of an electrical installation but exclude light bulbs, lights and any aesthetic damage that may occur. By taking out specific coverage, almost all household appliances are covered, but electrical damage to small appliances such as irons and hairdryers may be excluded.

Home repairs and DIY

This cover is generally optional, not available in all insurers, but can be very useful if we live in a property that is not new construction and may require small repairs that are not of great importance.

Normally, it is limited to a number of interventions per year and hours of work per intervention, depending on the company. The amount of the materials necessary to carry out the repair are the responsibility of the insured person. Still, the small increase in the monthly or annual payment of the policy can save us headaches and money if we are not too handy with DIY.

Accidental and technological risks

Mostly, home insurance covers the breakage of glass, mirrors, sanitary ware and ceramic hobs, but if we contract an accidental and technological all-risk policy, we will be covered for any accidental damage to furniture and electronic appliances.

Obviously, this cover is not unlimited; the terms and conditions of the policies will stipulate the maximum age of the appliances and the cost of repairing or replacing the television, computer, etc. It should also be borne in mind that we must keep the original purchase invoices in order to be entitled to compensation.

If you want to discover fair insurance for your home and for society, check 11Onze Segurs.

The Quantum Financial System (QFS) will introduce a new decentralised system of cross-border interbank payments based on a digital currency underpinned by physical assets such as gold.

While the world of financial services is constantly evolving, the Quantum Financial System (QFS) has the potential to revolutionise a banking sector that is often constrained by legacy systems that are overstretched by the need to adapt to the possibilities offered by new technologies.

Before delving into the role of gold within the QFS, it is important to understand that it is a new technological development that would use quantum computing and cryptography through a blockchain platform which would allow for secure and fast transactions without the need for intermediaries such as banks and financial institutions.

One of the main advantages of QFS is its ability to prevent fraud and money laundering, which are significant concerns in today’s financial system. This would be achieved through the use of advanced encryption and authentication technologies that would ensure the immutability of data, preventing manipulation and guaranteeing the integrity of transactions.

In addition, a quantum financial system would be particularly useful in applications where algorithms are fed by real-time data streams, facilitating the transfer of information and enabling near-instantaneous financial transactions, which customers could see immediately updated on their digital platforms.

The role of gold in the QFS

One of the ways in which the QFS could revolutionise the financial sector is through the creation of a digital currency backed by physical assets. This would not be a cryptocurrency but a digital currency that could be backed by physical gold, which would guarantee its value and stability. Thus, only gold-backed coins with a digital gold certificate would be able to participate in the transactions of a QFS.

The printing and pouring of large amounts of money into the economy through increasingly unsustainable fiscal deficits are damaging the credibility of the global fiat currency system and deteriorating government finances. It is therefore not surprising that economic uncertainty and loss of confidence in fiat currencies incentivise a return to fiat currencies backed by safe-haven assets such as precious metals.

In this context, gold is likely to play an increasingly important role in supporting currencies and transactions, a monetary system in which the value of currencies is underpinned by their convertibility into gold. The example of the QFS is not unique; Zimbabwe is about to introduce a gold-backed legal tender digital currency in order to help stabilise the economy in the face of the rapidly depreciating Zimbabwean dollar. A trend that some analysts see as an unmistakable sign of a paradigm shift in the international monetary system.

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Will the arrival of the digital euro mean the disappearance of cash, will it be a tool for greater control over citizens, and what are the European Central Bank’s tricks to encourage its introduction? From 11Onze, we offer answers to eleven fundamental questions about the digital euro.

Christine Lagarde, President of the European Central Bank (ECB), recently justified the need for a digital euro because of the “potentially disruptive transformation” that the payment model is undergoing due to the increase in digital transactions, the appearance of new digital assets and the entry of big techs into the payments market.

The rise of digital payments is illustrated by an ECB study, which indicates that the value of card payments (46 %) has already surpassed that of cash payments (42 %). And that is not counting other forms of payment such as mobile applications. Given this reality, Lagarde warned that money as we know it could lose its role as a monetary anchor, “threatening its key role in ensuring confidence in payments”.

Without this “public anchor”, the emergence of new types of digital assets, such as cryptocurrencies, could generate “instability and confusion among citizens about what is money and what is not”, according to the ECB president, who warned about the volatility of crypto-assets and the need to develop regulation.

In addition, Lagarde indicated that the entry of big techs into the payments market “could increase the risk of market dominance and dependence on foreign payment technologies”, arguing that “currently more than two thirds of card payment transactions in Europe are handled by companies based outside the European Union”.

In this context, the European Commission is expected to make a proposal on the legal framework for the digital euro later this semester. There are still many unknowns about the future currency, although the European Central Bank has already outlined what the broad outlines of its implementation should be. However, we should not forget that its success or failure will ultimately depend on the degree of adoption it achieves among the citizens of the euro area. 

• Will the digital euro replace cash?

No. The ECB has made it clear: the digital euro would be a complement to cash, not a substitute for it, so banknotes and coins will remain in circulation. The idea is that the digital euro will work in parallel to cash to meet the growing consumer demand for fast and secure digital payments. But its role goes beyond that. According to the ECB President, the digital euro will “ensure that money continues to be denominated in euro” and will strengthen “Europe’s autonomy”.

What is the timetable for its introduction?

A research phase for the project began in July 2021 and should be completed by October 2023. In parallel, the European Commission is due to draw up a proposal for a legal framework for the digital euro in the coming months. By the end of this year, the ECB should decide whether to move to the next phase, focusing on the development of integrated services. In this phase, which could last between one and three years, tests and possible real experiments with the digital euro would be carried out. Against this background, experts estimate that the digital euro could be operational in 2025 or 2026.

Will it be considered legal tender?

All indications are that it will. The ECB President has indicated that “it would be unprecedented to issue central bank money for retail payments without legal tender status just because it circulates electronically”. She added that “the digital euro can only function as a monetary anchor if it becomes a convenient digital medium of exchange that is part of the everyday life of Europeans”. In this respect, Lagarde pointed out that, to achieve sufficient network effects, the use of the digital euro should be extended not only to e-commerce and peer-to-peer payments but also to digital payments in physical shops, which accounted for 40 billion transactions in 2019. 

Will there be parity between digital and physical euros?

Yes, in the words of Christine Lagarde, the digital euro will “safeguard citizens’ confidence that a euro is a euro by allowing them to convert private money into digital central bank money at parity”.

How much privacy will it offer?

Although 43% of Europeans rated privacy as the most relevant aspect of the digital euro, the ECB President has acknowledged that “the total anonymity offered by cash does not seem a viable option” for the digital euro. However, the European banking regulator indicates that the digital euro would allow payments to be made without sharing data with third parties unless this is necessary to prevent illicit activities. And it warns that for payments to remain private, different types of data would need to be protected, including the identity of the user, the details of each payment (e.g. the amount) and transaction metadata such as the IP address of the device used. In this respect, it is likely that there will be different degrees of privacy for different payments and that users will have to identify themselves the first time they access digital euro services. Lagarde specified that “at least an equal level of privacy should be provided as in current electronic payment solutions” and noted that it is being explored whether the digital euro “could replicate some features of cash and allow for greater privacy for low-value, low-risk payments, including offline payments”.

Will it be an alternative currency within the Eurosystem?

No. The digital euro would just be another way of paying in euros and would be convertible at parity with physical banknotes. The ECB insists that the aim is to respond to the growing preference of citizens and businesses for digital payments.

What advantages will it have over stablecoins and crypto-assets?

The digital euro will be supported by the ECB, which recalls that one of the tasks entrusted to central banks is to “maintain the value of money, regardless of its physical or digital form”. Although the high inflation of recent times calls into question their efficiency in fulfilling this mandate, it is clear that the ECB’s backing will guarantee greater stability than that exhibited by the highly volatile stablecoins and cryptoa-ssets. The European body warns that “the stability and reliability of stablecoins depend on the entity issuing them and the credibility and enforceability of its commitment to maintain their value over time”. It adds that where there is no recognised entity responsible for a crypto-asset, consumers cannot claim their rights. Moreover, the ECB warns of the risk of private issuers using personal data for commercial purposes.

What incentives will consumers have to use the digital euro?

The ECB ensures that the digital euro will be a digital means of payment that is as secure, easy to use and cheap as cash is today. The idea is that it will be free of charge for people using it for ordinary payments and that it can be used anywhere in the euro area. In a world where electronic payments are increasingly common, the digital euro would offer individuals and businesses an additional option to pay using central bank money. In addition, the digital euro could offer advanced features, such as automated payment functions or some form of digital identity.

Will there be limits on the conversion from physical to digital euros?

Probably. Options to prevent large amounts of digital euros from being held as a risk-free investment are being evaluated.

Will there be different levels of remuneration?

This is also quite possible. According to the ECB, if digital euro holdings were remunerated, the remuneration of the ordinary (i.e. “tier one”) retail payment leg would be zero or positive and thus never lower than that of cash. The European banking regulator considers that the remuneration of “level two” should be somewhat lower than that of assets considered safe. The aim would be to prevent the digital euro from becoming a form of investment.

Will it be based on blockchain technology?

This has not yet been decided. The Eurosystem is considering different approaches and technologies to create the digital euro. This includes centralised and decentralised solutions, such as blockchain, but no decision has yet been taken.

In a world marked by the payment revolution and the rise of crypto-assets, which are eroding the role of central banks and fiat currencies, the ECB aims for the digital euro to become “the best way to manage the transition to the digital age“.

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It is common for a burst pipe or drain in an upstairs flat to cause damage to your home. In fact, every year there are a huge number of interventions by insurance companies due to water leaks. What should you bear in mind to solve this problem?

You may have had the experience of arriving home and discovering a large damp stain coming from the ceiling. Water damage caused by a neighbour is a very common incident.

If it is already a nuisance to have a water leak at home, the situation can be even worse when we suffer the consequences of a water damage from someone else’s home. Fixing our damage can be complicated if the owner of the home where the water is coming from does not have insurance and our policy does not include legal expenses.

A small leak can turn into a full-blown waterfall, so the first thing to do is to locate your neighbour as soon as possible and tell him/her about the situation. To prevent the problem from getting worse, the best thing to do is to immediately turn off the water until the technicians arrive and fix the problem.

Whether our neighbour has home insurance, we are entitled to compensation for water damage, which in this case usually takes the form of repairing the elements of our home that have been damaged.

Does their insurance cover leaks?

In the event that our neighbour has insured his house, it is expected that his insurance will take care of our damages. But we must take into account that there are some cases in which our neighbour’s insurance will not cover water leaks. 

If the water leakage is due to carelessness on the part of our neighbour, who has left a tap running and has been away from home for more than 72 hours, the insurance company will not cover the damage. Neither will your company assume the repair if the neighbour has neglected the maintenance of his house and the leak can be attributed to this.

On the other hand, if the leak has occurred as a consequence of building work in our neighbour’s house, we will have to demand the repair from the person responsible for the work, who must have civil liability insurance.

What to do if the responsible party does not take responsibility for the repair?

Even if the person responsible for the water leak does not have home insurance, they are still obliged to pay for the damage, either by paying directly for the repairs at our home or by paying our bill if for some reason we have to pay in advance.

If the neighbour refuses to cover the repairs, we should take photos or videos of the damage caused by the leaks. It is then worth calling your insurance company, if you have one, to send an expert. Their report will serve as evidence if we have to go to court. 

In addition, if our policy includes legal expenses, we can take advantage of this, asking for a lawyer to handle the claim. Our lawyer will send the neighbour a claim stating what happened and asking for the damages to be repaired. If the other party still refuses to pay, then we will have to file a lawsuit. 

The legal process followed in these cases is quick and simple. The judgement will order the defendant to pay for the repair or settle the bill if we have fixed the damage ourselves. Ultimately, if the responsible party does not comply with this obligation, we will have to request the execution of the judgement so that the amount owed to us can be seized.

If you want to discover fair insurance for your home and for society, check 11Onze Segurs.