1c and 2c coins here to stay

It costs 4.5 cents to mint one of the one-cent coins which may be clogging your wallet or lay forgotten in a back pocket rather than making its way to the cash register.

But while Belgium has joined the Netherlands and Finland in withdrawing the 1 and 2 euro cent coins from circulation, Malta where inflation remains a primary concern of the public, has no intention of following suit.

According to a spokesperson for the Ministry for Finance, the removal of these coins would fuel “perceived” inflation.

“Income levels in Malta are lower than those in the three countries mentioned. Therefore, 1 cent and 2 cent coins have a higher relative value in Malta”.

Additionally, the removal of such coins from circulation would require rounding of retail prices, leading to perceived inflation whereby people would suspect that retailers had rounded the prices upwards.  

“This is a real risk that the Government is aware of, since it was the reality experienced by the Netherlands and Finland when these countries phased out their 1 cent and 2 cent coins”.

The issue of the removal of these coins had been discussed at two European Commission fora: the Economic and Financial Committee (EFC) and the Euro Coin Sub-Committee (ECSC) and according to the finance ministry “the general feeling was that although the actual inflationary effects of the removal of the 1 cent and 2 cent coins were likely to be significantly less than the perceived effects, the majority of members were not in favour of the elimination of these two units as yet”.

The Commission representative at that meeting said that unless there was the political wish of the majority to take such a decision, the Commission was not prepared to act in this direction.

“The Commission was not pleased to note that certain countries (such as Finland and Netherlands) were taking unilateral action to eliminate these small denominations, but apparently was not prepared to formally draw their attention in this regard”.

Coin madness

It is estimated that it costs 4.5 cents to mint a one-cent coin. The 1 cent euro coin (€0.01) has a value of one-hundredth of a euro and is composed of copper-covered steel.

The production of these coins, whose inside is made of iron and whose outside is copper, is more expensive than their face value.

The European Commission has reported that the difference between the production costs and the face value of the single currency's coins since their introduction has already grown to more than 1.4 billion euros

In February Belgium decided to abolish the 1 cent and 2 cent coins.

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.

All prices in Belgian stores will be adapted to suit the decision made by the parliament in Belgium last week. Prices ending in one, two, six or seven cents will be rounded down to the nearest zero or five cent value. Prices ending in three, four, eight or nine meanwhile will be rounded up to zero or five cents.

According to Belgian Minister of the Middle Classes Sabine Laruelle the decision will bring only advantages. Business owners will no longer have to stock and change the small coins, while customers’ wallets will no longer be clogged with the small change. The minister added that she does not expect a hidden price increase as part of the price adjustment.

In the Italian parliament, a motion to abolish the two coins has been presented by the Left Ecology and Freedom Party which considers the production of these denominations a waste of money.

But scrapping the coins is considered unthinkable for Germany where both consumers and retailers are obsessed with precise pricing. Surveys in Germany show that a huge majority of consumers like the one- and two-cent coins and want to keep them.

Luxemburg has also taken a cautious approach similar to Malta’s with its Finance Ministry hesitant to adopt a policy to eliminate the coins, which it says could affect inflation and have a negative psychological impact on consumers.