Econostrum | Economic News in the Mediterranean
en.econostrum


   
en.econostrum



European Commission prepares for end of 1 and 2 cent coins



           


The question of the abolition of the one- and two-cent coins is becoming more and more important (photo: F. Dubessy).
The question of the abolition of the one- and two-cent coins is becoming more and more important (photo: F. Dubessy).

EU. The European Commission launches on Monday 28 September 2020 an evaluation and impact assessment on the use of the 1 and 2 cent coins with regard to cost and public acceptability criteria. European citizens will be able to express their views for four weeks on whether or not to abolish them through an open consultation on a dedicated website.

Various institutions, the competent national authorities of the Member States and civil society will also be able to express their views.

Officially, the consultation will focus on the various euro coins, but the aim is to decide, at the end of 2021, "whether a legislative proposal on the introduction of uniform rounding rules for cash payments and in the euro area, and possibly the abandonment of the 1 and 2 cent coins, is justified", says a European Commission press release. The economic, environmental and social impact of these coins will be studied by the institution.

 

Four scenarios for the 1 and 2 cent coins

The process was started in 2013 with the publication of a report ("Issues related to the continued issuance of 1 and 2 cent coins") from the Commission to the European Parliament and the European Council. Four scenarios were proposed at that time: the "status quo" with the continuation of issuance under current conditions, without changing the legal or material context; "low-cost issuance" by changing the physical composition of the coin, improving production efficiency, or both; "rapid withdrawal" with the abolition and withdrawal of the one- and two-cent coins for a short period of time, accompanied by rounding rules; and "phasing out" with the cessation of the issuance of the one- and two-cent coins and the introduction of rounding rules. Coins would no longer be produced and binding rounding rules would also apply in this scenario, but the coins would remain legal tender.

Also in the latter scenario, the use of 1 and 2 cent coins would be allowed only for the payment of the final rounded sum. The aim is that, without a new issue, "these coins would gradually disappear from circulation because of their high loss rate and their lack of attractiveness as a means of payment", the text stated.

Production of the 1 and 2 cents is a loss-making activity

The discussion was relaunched in November 2018 with another report entitled "Latest developments on euro coins". This document revealed that almost half of all euro coins issued are one- and two-cent coins" (see table below). And that "statistically speaking, every euro-area citizen holds 181 of these coins" compared to 145 in 2013. The return rate of one- and two-cent coins to national central banks is the lowest of all denominations. "One-way use, a low return rate to national central banks and a steady increase in the issuance of the one- and two-cent coins all support the hypothesis that these denominations are not circulating efficiently among economic operators, but are mostly hoarded or lost," the end 2018 report said. In addition to the environmental cost of lost coins, the European Commission also notes that "the acquisition costs alone already exceed the face value of the coin. From a budgetary point of view, issuing this denomination is a loss-making activity for member states," the document stresses.


The manufacture of a penny would cost legal issuers between 0.9 and 2 cents.

Some countries are already ahead of the call. Finland, for example, requires the final amount of purchases to be rounded up to the nearest five cents when paying in cash. The Netherlands does this systematically. Belgium passed a law in 2014 to prescribe voluntary rounding, as did Ireland a year later. Italy has also passed legislation to impose rounding and has stopped minting one- and two-cent coins.

In 2017, a European Commission poll showed that a large majority of Europeans (64%) were in favour of abolishing the two coins.

 

Production of euro coins

Year All pieces combined 
(in billions)
All 1- and 2-cent coins combined 
(in billions)
Percentage of 1- and 2-cent coins 
(in relation to all coins minted in the euro area)
December 2002 40  14 35
End of 2004 54 21 39
End of 2007 73 31 42
End 2012 102 47 46
End 2017 126 61 48



Frédéric Dubessy


Monday, September 28th 2020



Article read 358 times


Articles which should interest to you
< >

Wednesday, October 21st 2020 - 16:55 Issuance of the first European social bonds for €17bn