It was an odd way to shop, thought the sales assistant at the state-of-the-art electronics showroom in the Spanish capital.
"This guy didn't mind what he bought. He had 2 million pesetas (US$10,770) in cash and asked what could he get for it," the assistant said. "We can't be sure but think it must have been the black peseta."
As undeclared banknotes surface ahead of the January 1 introduction of the single euro currency, real estate agents, luxury car salesmen and tax inspectors around Europe say they have grown used to unusual spending habits.
The informal economy has been estimated at up to 16 percent of the total EU official economy, or about 1.3 trillion euros (US$1,147 billion), and massive sums of untaxed cash have been on the move ahead of Jan. 1 next year, helping cushion a global slowdown.
In Germany, customs officers are doing a roaring trade in stopping limousines en route to Luxemburg and Switzerland, drawing in a haul of millions of undeclared marks before the changeover to the new currency.
German tax inspectors have also travelled to the Spanish island of Majorca to investigate Germans buying holiday homes with undeclared cash, officials in Majorca say.
Police in Portugal say they have spotted "rather obscure transactions," especially in the booming real estate market.
And in Paris, antique dealers have seen a surge in sales of long-neglected furniture and paintings as people dig "black" francs from under the mattress and sink them into assets, newspapers have reported.
More sinisterly, criminal gangs are laundering money by buying real estate across Europe ahead of the euro changeover, especially in the busy tourist resorts along Spain's coastline, according to the European police organization Europol.
"We have been in contact with southern European countries looking at who is investing there in real estate at the moment," said Europol's deputy director Willy Bruggeman.
Friedrich Schneider, an expert on money laundering at Austria's University of Linz, said billions of hot German marks and Austrian schillings were in the hands of Eastern European criminal groups, mostly in Russia and Ukraine.
"They are spending billions of marks on land and property in Spain and Portugal and Italy," he said. "It won't have a macroeconomic impact but it will make it harder for criminal investigators to follow up the money once it's laundered."
Property prices in Spain have soared more than 40 percent over the last three years but executives from the sector say rising living standards and historically low interest rates are the real drivers behind the boom.
Schneider added that measures to tackle money-laundering in Europe -- proposed amid the anti-terrorism backlash after the Sept. 11 attacks on the US -- were unlikely to be introduced in time to catch any of the pre-changeover surge.
Meanwhile offshore, non-euro currencies are also being sought as a hiding place for cash.
Rising demand for large-denomination Swiss banknotes is a sign that EU black money is seeking a home in Switzerland.
Latest statistics show a rise in the circulation of the SF1,000 (US$609) note -- rarely seen in corner shops and too big to fit in a standard wallet -- of 7.2 percent in this year to July compared with 5.7 percent for all bank notes.
On a smaller scale, owners of hidden cash urgently seeking a new shelter have been buying up Moroccan dirhams with pesetas and other currencies in Spain's North African enclave of Ceuta, putting pressure on the dirham locally, news reports have said.
Conversely, central banks in euro-zone countries have reported a fall in demand for banknotes, a gauge of the amount of cash flowing into the economy from other, hidden sources.
The Federation of French Banks (FBF) estimates about half the FF150 billion (US$20.17 billion) not in circulation at the start of this year will have re-entered the system by the end of the year.
In Spain, the amount of official cash in circulation fell 4.9 percent in the first seven months last year, despite still strong economic growth, meaning 1.0 trillion pesetas (US$5.39 billion) were pumped into the economy from unofficial sources.
Economists say as much as 1.4 trillion black pesetas will be spent this year as a whole, about half the total estimated stockpile of undeclared cash in Spain.
Spanish retail sales jumped 12.5 percent year-on-year in August and sales of luxury cars have soared with Mercedes Benz Espana reporting a nearly 30 percent increase in units sold in the first nine months of the year.
In the Netherlands, the number of bank notes in circulation at the end of August was almost 7 percent lower than in the same month last year, a Dutch central bank spokesman said.
In France, spending of undeclared francs has helped offset the impact of a slowing world economy, economists say.
"That's one of the main reasons why we might see growth in the third quarter rebound in France and an important factor why growth in the fourth quarter might not be negative," said Guillaume Menuet, an economist with consultancy 4Cast in London.
But the sudden end to the pre-euro shopping frenzy would have only a small negative impact on growth next year, he said.
In Italy, officials are trying to woo back an estimated US$320 billion in savings held overseas, much of which is believed to have been spirited out of the country to avoid tax.
Despite so much undeclared cash washing around, governments in the euro zone appear largely unwilling to use the changeover as an opportunity to crack down on tax fraud.
Each country has set its own limits on how much cash can be changed into the new single currency, no questions asked. In Spain, the equivalent of 15,000 euros can be changed at a time, nearly double the 8,000 euro limit in France.
"You can't call an amnesty and reward for tax fraud and you can't check up on who spent what," said Manuel Balmaseda, an economist at Banco Bilbao Vizcaya Argentaria in Madrid.
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