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Cost of Minting Small Change Hefty
By Richard Giedroyc, World Coin News
July 16, 2013

This article was originally printed in World Coin News.
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The 1- and 2-cent euro coins may be small change, but producing them costs a lot of money.

According to the European Commission, it has cost European Union members participating in the currency union 1.4 billion euros or about $1.8 billion U.S. over the last 11 years. It is for this reason there is now a proposal for the 17 participating countries to scrap these two denominations entirely, making the 5-euro cent coin the lowest denomination in circulation.

Consumers are skeptical of dumping these two denominations, particularly the Germans and French. According to a recent Eurobarometer survey, 52 percent of those surveyed within the EU support removing the two coins. Among Germans only 32 percent support the idea.

Unfortunately for the consumer it isn’t their decision to make. The EC will make that decision for them. The decision will be based on the results of consultations with the countries participating in the currency union, as well as discussions with the European Parliament.

EC Economic Affairs Department spokesman Vandna Kalia was recently quoted as saying, “The ball is now in the court of the member states to see if they can come to an agreement.”

The EC, of course, doesn’t have to order the end of 1- and 2-cent euro coins at all. It can also consider changing the metal composition of these coins to something less expensive.

Regardless of any action or inaction taken by the EC, Finland and the Netherlands have for practical purposes already eliminated further production of the two denominations. Ireland is considering following their example. The coins remain as legal tender in these countries. You simply can’t get the denominations issued in their name, unless you remove a coin from a mint set.

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Both countries continue to offer the coins in these annual collector sets, but no longer for circulation. The Netherlands estimates it saves $36 million annually be having discouraged using the smaller coin denominations.

Both Finland and the Netherlands use what is called Swedish rounding. Sweden has done away with what at the time was its lowest denomination coin four times throughout the past four decades. When paying for something in cash in Sweden prices are rounded to the nearest 5 cents, either up or down.

A major concern among those opposed to eliminating the 1- and 2-euro cent coins is the prospect of inflation. Germany favors the continuation of the coins due to psychological pricing. Retailers would rather price something at 1.99 euros rather than at 2 euros.

ING Senior Economist Carsten Brzeski in Brussels addressed these concerns in a May 17 Reuters news release in which he said, “People like to be concerned, but if you think about the psychology of price, I think you’ll rather see a rounding down to 95 cents than an upward adjustment.”

According to the same press release, “The 1- and 2-cent coins were initially introduced in order to ensure that the introduction of the euro was not used as an excuse by retailers to heavily round up prices.”

It’s difficult to say if inflation would raise its head should these low denominations be demonetized entirely. In February 2013 Canada ceased producing its 1-cent coin, again due to production costs and a lack of usage. Since that time Canada has been reporting an inflation rate of 1.1 percent.

The EU needs to consider the comment in the Reuters news release: “More than 45 billion of the 1- and 2-cent coins have been minted since the euro entered circulation in 2002, but many are now buried behind sofas, lost in back pockets, or left on the street rather than making their way to cash registers.”

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On July 16, 2013 ford ka said
It's all true except Sweden doesn't use the euro and consequently they can't round up to 5 cents. They do, however, up to 1 krona ;)

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