Author Topic: European Commission to review euro coins series  (Read 1446 times)

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Re: European Commission to review euro coins series
« Reply #15 on: January 04, 2019, 07:51:58 PM »
The 2 scenarios they think best for the 1 and 2 euro cent coins:

Pros and cons of the withdrawal of coins and the swift loss of legal tender status

Should the Member States decide to withdraw these coins, their issuance would stop and they would lose their status as legal tender for payments fairly quickly, possibly with the right to redeem them at central banks even after loss of such status. Mandatory rounding of the final sum of purchase to the nearest five euro cents at cash payment would be needed throughout the euro area, to make sure that the same rule applies in the same way to the entire area. The coins would have to be actively withdrawn from circulation.

This would imply:

• immediate cost-savings: no more production or issuance costs, and no negative seigniorage;
• no more handling costs for one- and two-euro cent coins;
• rapid response to the citizens’ preferences.

The downside would be the one-off costs of withdrawal. Further analysis would be necessary to obtain an estimation. These costs are difficult to estimate because they will depend on the attitude of citizens in each Member State and their eagerness to effectively return the denominations withdrawn. Previous experiences from changeovers to the euro indicate that such costs would be limited, in particular concerning very low denominations, where existing high rates of loss already point towards a lack of discipline in caring about the value represented by these coins.

Pros and cons of the phasing out of coins and the non immediate loss of legal tender status

Should the Member States decide to phase out these coins, their issuance would also stop, while the legal tender status would be withdrawn only later. Stopping the production and issuance of these coins would have a similar effect to the first scenario. However, they would remain in circulation but disappearing little by little, as large numbers of coins continue to be lost and no new ones are issued. The legal tender of the coins for payment could be withdrawn at the earliest when the circulation of the coins becomes purely residual, possibly with the right for redeem at Central Banks even after the legal tender ended. This measure would have to be accompanied by mandatory rounding as soon as the coins cease to be issued, as in the first scenario.

This would imply:

• no withdrawal costs;
• one- and two-euro cent coins would continue to be used to make payments for longer.

Compared to their withdrawal, this would imply:

• fewer economic benefits, given continued handling costs for the one- and two-euro cent coins in circulation until their numbers dwindle;
• retailers would have to continue to cater for processing one- and two-euro cent coins, albeit much less so, due to the rounding up;
• less immediate response to the wishes of most people in the Member States concerned.