Fabian Demicoli

The future of the 1 & 2 cent coins


The Commission has suggested
four possible scenarios for the future issuance or withdrawal of 1 and 2 euro
cent coins. These are largely focused on the cost-benefits of producing and
issuing the coins and the attitude of the general public towards the coins.

Status
quo

1 and 2 cent coins
continue to be issued under today's conditions, without changing the legal or
material context. They remain legal tender and continue to be produced with the
current technical specifications (such as metal, weight and size) and without changing
the production and issuance processes.

Issuance
at reduced costs

The coins continue to be
issued but issuance costs are reduced through changing the material composition
of the coins or by increasing the efficiency of the coin production, or both. This
would address the problem confronting most euro area Member States facing
losses as a result of issuance costs far exceeding the face value of the coins.

Quick
withdrawal

Under this scenario, the
issuance of these denominations ceases and the coins in circulation are
withdrawn, mainly through retailers and banks within a pre-established short
time period. Binding rounding rules would apply as of the first day of the
withdrawal period and the coins would cease to be legal tender at the end of
the withdrawal exercise.

Fading
out

The issuance of coins
would cease and binding rounding rules apply also under this scenario, the
coins would remain legal tender. They could still be used, but only for payment
of the rounded final sum. Since no new coins would be issued, they would be
expected to disappear gradually from circulation due to their high loss rate
and lack of attractiveness as convenient payment means.

A number of key
conclusions can be drawn from the stakeholder consultation and the analysis:

1. The production of 1 and 2 cent coins is clearly a
loss-making activity for the euro area with the difference between the face
value of the coins and the price paid by the state to get them pointing at an
estimated total cumulative loss of €1.4 billion since 2002.

2. The
attitude of the general public is rather mixed: while people are attached to
these small denominations and fear the risk of inflation if they were to
disappear, they handle these coins as non-value items and do not re-circulate
them in payment channels. The resulting high loss rate combined with the
existence of psychological prices leads to an ever-growing demand for issuance
of new small coins, which today represent nearly half of the coins in
circulation

3. While
the economics of issuing 1 and 2 euro cent coins would plead for discontinuing
issuance, cost elements need to be balanced against other considerations,
notably the negative reaction from the general public that rounding rules could
trigger.

The Commission's next step is to
continue further discussions with all the relevant stakeholders on the basis of
the four scenarios described. Should a clear preference emerge, the Commission
will come forward with the necessary legislative proposals.

What we can do for you

INFORMATION POINT

BUSINESS SERVICES

MEMBERSHIP BENEFITS

LOCAL ISSUES & LEGISLATION

B2B NETWORKING EVENTS

LEGAL ADVICE

FUNDING ASSISTANCE

COURSES

BECOME A MEMBER

The Malta Chamber of SMEs represents over 7,000 members from over 90 different sectors which in their majority are either small or medium sized companies, and such issues like the one we're experiencing right now, it's important to be united. Malta Chamber of SMEs offers a number of different services tailored to its members' individual requirements' and necessities. These range from general services offered to all members to more individual & bespoke services catered for specific requirements.

A membership with Malta Chamber of SMEs will guarantee that you are constantly updated and informed with different opportunities which will directly benefit your business and help you grow. It also entails you to a number of services which in their majority are free of charge and offered exclusively to its members (in their majority all free of charge).