Making cents is not making sense for many mints, calling in to
question the fate of the two smallest coins of the euro denomination.
By volume, the 1- and 2-cent euro coins are in demand, but their
value doesn’t match their cost, according to a May 14 European
Commission report outlining four possible scenarios involving the 1-
and 2-cent coins.
The two euro coins could (options 1 and 2) be withdrawn altogether
(either quickly or over time), (3) be struck from new alloys or with
other cost-saving efficiencies, or (4) European mints could continue
to issue the coins as they do currently while losing money.
Since the euro launched as a replacement currency for 12 nations
on Jan. 1, 2002, nearly 46 billion 1- and 2-cent euro coins have been
issued, a 74 percent increase from the initial amount prepared for the
switchover. That volume is equal to 137 coins for each of the
approximately 332 million eurozone residents.
All circulating examples combined have a face value of €714
million (about $921 million in U.S. funds).
Producing those coins has cost issuing authorities €1.4 billion
(or about $1.8 billion U.S. in current funds) in negative seigniorage,
the difference between actual costs and face value.
The report doesn’t identify at what point production costs
eclipsed face value, and none of the world mints that strike the coin
have released that information, either.
Cost concerns were the reason cited in 2004 when the Netherlands
joined Finland in the small group of nations where the coins are not
released for circulation. In those nations, prices are rounded to the
nearest 5-cent increment for cash payments.
The 1- and 2-cent coins represent a psychological paradox. Members
of the public are attached to the little coins and worry about
inflation if they were to disappear. However, users don’t value them
enough to recirculate them, causing demand for the coins to be so
great as to represent nearly half of all new coins minted and issued
in the eurozone.
If, as in one of the scenarios outlined in the report, European
mints simply stopped striking and issuing the two smallest
denominations, the coins could disappear from circulation altogether
within three to four years, according to the study. That is a slow way
to bid the small denomination coins farewell.
Another option laid out in the study was a rapid switch, where the
coins would only actively circulate and remain legal tender for a
short time. That scenario would resemble the so-called “big bang”
approach to the 2002 adoption of the euro, which permitted the
co-circulation of the new euro coins and the legacy coinage for
limited periods of time before the legacy coins were withdrawn, and
has been a model ever since as the eurozone expanded.
The eurozone, which originally had 12 member nations, now totals
In addition, several smaller nations in Europe, including Vatican
City, use the denomination due to currency agreements with legacy nations.
A bit more than one in five eurozone residents find it easy to
confuse the 1- and 2-cent coins, according to the latest EU Barometer
poll coordinated by the European Commission, which was published in
December. One-third believe there are too many denominations; in both
groups of respondents, the 1- and 2-cent coins are cited as most
problematic. In that same poll, some 88 percent said the 1-cent coin
should be withdrawn, with 82 percent expressing that sentiment for the
Study in response
The commission prepared the May 14 study in response to a request
from the European Parliament and the Council of Ministers in 2012 to
review the cost and public acceptance of all denominations of euro
coins and paper money.
The commission consulted business and consumer associations,
treasuries, mints and central banks on the pros and cons of continued
issuance of the 1- and 2-cent coins, said Olli Rehn, commission vice
president for Economic and Monetary Affairs and the Euro, according to
a press release from the commission.
The commission will now consult with people involved in producing,
distributing and using the coins about which of the four cited options
they would prefer. “Should a clear preference emerge, the Commission
will come forward with the necessary legislative proposals,” it announced.
Euro coins share common reverse designs, with the national sides
(obverse) featuring designs chosen at the national level.
Several countries in the eurozone have experienced financial
troubles in recent years, including Greece, prompting speculation that
some member nations might consider pulling out of the currency union
and returning to some form of legacy currencies. However, so far, none
of the eurozone members have announced any withdrawal from the union.
The euro coins and notes can circulate anywhere in the eurozone. ■