For millions of Europeans, one- and two-cent coins are an annoyance rather than a means of payment. But that’s not the only issue. The copper costs more than the face value of the coins, and ticket and vending machines that accept them are few and far between.
The Dutch, Belgians, Finns and most recently, the Irish have already removed them from circulation. Retailers in those countries round prices up or down to the nearest five cents for cash payments.
Now Italy plans to follow suit next year, and is the largest of the euro zone countries to do so. By phasing out the pieces, Italy would save an estimated €20 million a year. Other leading members of the currency bloc, including Germany and France – where consumers tend to pay close attention to exact pricing – will be watching with keen interest.
Phasing out small change would “open the door to a wild rounding-up of prices"
In Italy, consumer watchdogs say that eliminating low-denomination coins will stoke inflation. Carlo Rienzi, president of the consumer protection group Codacons, said it will “open the door to a wild rounding-up of prices in the retail trade.”
The Italian finance ministry has said it will issue rules on rounding prices, applicable to cash payments only, while Italy’s cartel authority has pledged to monitor price movements, but Mr. Rienzi said this wouldn’t help. When Italy switched from the lira to the euro in 2002, retailers systematically broke rules on the rounding of prices, he said.
Nevertheless, 67 percent of Italians favor saying “arrividerci” to small change, according to a readers’ poll by Italian newspaper Il Mattino. In Germany, a smaller majority of 57 percent favors getting rid of the one- and two-cent coins, according to a poll last year by the myMarktforschung research group.
Whether Europe’s largest economy could follow suit is unclear. That’s partly because Germans tend to prefer cash over cards more than most other European countries, and are suspicious of any moves that could lead to cash being phased out. An effort to put limits on large cash payments last year was fiercely opposed by many.
The euro’s 19 member states have sovereign rights over the issuance of coins. It’s a different story with bank notes, the domain of the European Central Bank and national central banks.
One- and two-cent coins will remain legal tender in countries that no longer mint them, or that do so in small quantities. Complete abolition can only be decided at the European level. That would be an enormous logistical challenge: billions of these coins are officially in circulation, although many have disappeared into the backs of sofas and children’s piggy banks.
In Germany, every resident held an average 200 such coins in 2015. Gerald Mann, a professor of economics at Munich University of Applied Sciences, said getting rid of them would boost efficiency and benefit retailers and shoppers alike.
“Unlike what many people assume, eliminating small coins doesn’t have to be the beginning of the end of cash. It could even help cash survive because costs will be cut,” said Mr. Mann.
German retailers’ federation HDE is no fan of the coins, but opposes voluntary guidelines to rounding prices as long as the money remains legal tender.
Elisabeth Atzler has been a banking correspondent of Handelsblatt in Frankfurt since 2012 and Regina Krieger is Handelsblatt’s Italy correspondent, based in Milan. To contact the authors: firstname.lastname@example.org and email@example.com