ECB likely to decide next week to scrap 500-euro bill - source

FRANKFURT, April 26 (Reuters) - The European Central Bank is likely to decide at its May 4 Governing Council meeting to scrap the 500-euro ($564) banknote, a source familiar with the discussion said, a move that could add to the ECB’s tensions with Germany.

Germany was an early champion of the 500-euro note which matches the value of its old 1,000 mark note and caters to Germans’ traditional preference for cash over electronic money.

If the ECB does decide to get rid of the largest denomination euro banknote, it is likely to opt for a long transition period, not making old bills obsolete and not forcing people to exchange their bills, a second source with direct knowledge of the issue said.

The ECB has been looking to stop printing the 500-euro note, despite the objections of Germany’s central bank, on concerns that it is also used by criminals and militants to finance their activities.

Critics argue that the move would not actually curb criminal activity but would infringe on individual freedoms, cutting the amount of cash in circulation.

Seeking a compromise, the ECB is likely to stop printing and distributing the bill in 2018 but continue to exchange it indefinitely, mirroring the policy adopted by Germany’s Bundesbank when the euro replaced the deutschemark in 2002. ($1 = 0.8861 euros) (Reporting by Frank Siebelt and Balazs Koranyi; Editing by Louise Ireland)