Estonia: Thoughts about 1 and 2 cent coins

[chrisild]

In Estonia, the central bank has recently issued a lot of coins. But not a lot of money. In the second quarter of 2023, "Eesti Pank issued 7.3 million coins with a total value of 3.1 million euros." (Press release)

The central bank expected a certain increase, now that more "open air" activities are going on. Oddly enough, however, most pieces made "(3.5 million coins) were one and two-cent ones, which made up as much as 48% of all the issued coins."

As in other countries that have not introduced rounding so far, these coins are "received" (in change) but then not spent again. About five years ago, Eesti Pank already suggested the rounding of cash totals - see the link in the press release. But apparently nothing has happened in that regard.

Now Estonia is, like neighboring Latvia and Lithuania, not really a cash oriented country AFAIK. But if "non-cash" payments are quite common anyway, why not use rounding when it comes to the remaining transactions?

[FosseWay]

I have to admit, I thought Estonia had already in practice abolished the tiddlers.

Is there something odd afoot here? It presumably still costs less to make 1c and 2c coins than their face value. If Eesti Pank makes 1m euros worth of such coins and flogs them to Germany, presumably the Bundesbank will pay 1m euros, not just the production cost, so Estonia, and not Germany, pockets the seigniorage.

[Angus]

Does this imply 2023-dated 1 and 2 cent coins? I haven't seen any.

[chrisild]

It presumably still costs less to make 1c and 2c coins than their face value.

I guess so. May depend on where they are produced; Estonian euro and cent coins are usually minted in Finland, Lithuania and the Netherlands. The Estonian central bank's press release merely says "the production and handling costs as well as the environmental impact of such coins are disproportionately large compared to their role in the cash cycle" ...

@Angus: That is what the press release says. As for the second quarter of this year, "The coins issued most (3.5 million coins) were one and two-cent ones, which made up as much as 48% of all the issued coins." No idea where they all end up.

[Rasmus]

This year Estonian Bank ordered 5,10 and 20 cents coins
https://www.eestipank.ee/en/notes-coins/euro-coins

Anyway, none of 2023 dated circulation coins haven't released yet.

[eurocoin]

It will be very interesting to see which reverse will be used on the 5 cent (and on the 1 and 2 cent in the set). Last year they used the old reverse on the 1 and 5 cent but the new one on the 2 cent. That was the first time that Estonia used the new reverse design.

[Angus]

Sorry, but what do you mean by different reverses?

[FosseWay]

There have been some minor changes made to the reverse of the "copper" eurocent coins - see this topic for more information. Because they've been implemented at different times by different countries on different denominations, and sometimes old and new variants have been struck with the same date, this has given rise to a number of varieties.

[chrisild]

Instead of just doing away with the 1 and 2 cent coins, the central bank (Eesti Pank) and the postal service (Omniva) just launched a "bring them back" campaign.

Here is the press release. The concept is to collect 1 million of these pieces. People can take them to one of two participating post offices in the country (one in Tallinn, one in Tartu) and get cash in higher denominations back.

The service is free of charge until 22 October, or until the 1 million pieces mark is reached – whatever comes earlier. After that, the coins can still be exchanged but customers need to pay a 5% service fee.

[chrisild]

Apparently the target was reached at a pretty early stage. Just read in a different forum that, as from today (Thu.), it will cost money to get money exchanged. See the press release here.

[Figleaf]

Why is it a paying service to exchange coins in one denomination for a coin in another denomination? I can understand specifying that the coins must be rolled in paper the bank or post office provides or offered in their money bags, so that they can easily be weighed. I can accept that a supermarket that operates a cash exchange machines gives a "good for" ticket for the cash that can be spent in the supermarket chain only. However, that's about the limit.

Cash is not a capitalist good. It is a traditional social service of the government to settle small payments, produced with tax money and potentially offring seigniorage. It must not be taxed or attract fees on its use and exchanging circulating coins is using cash.

Peter

[chrisild]

When it comes to "everyday use", I fully agree. But here we are talking about lots and lots of low denomination coins that the local central banks insists on issuing (instead of rounding) and that then end up in coin jars at people's homes.

If somebody in Estonia spends such coins in a regular cash transaction (you want to pay €3.78 and, for the "8" part, use 5+2+1 ct or 4x2 ct or so), I don't think there would be a charge. Except that this campaign is or was not about such regular use ...

[FosseWay]

Why is it a paying service to exchange coins in one denomination for a coin in another denomination?

Because if people can make a fast buck out of other people, they will, and for whatever reason the EU refuses to legislate on this whole area of bank charges, transaction charges and fiddling with exchange rates. They sorted mobile roaming out, so why not banks?

[chrisild]

They sorted mobile roaming out, so why not banks?

Maybe because roaming affected/affects more than one member state? Similarly, we can use "instant payment" when transferring money from one euro account to another. The whole procedure takes ten seconds or so, at any time, great. Except that, at least here in Germany, most banks charge extra for that service (the worst I have seen was €2 per transaction). That means this option is not used much, so most people use standard transfer which takes a business day except on weekends ... or they use other means of payment.

But while mobile roaming, and apparently credit card fees, are "EU competences", such excessive fees are not. Guess it's the same with cash management fees ...

[Figleaf]

for whatever reason the EU refuses to legislate on this whole area of bank charges, transaction charges and fiddling with exchange rates. They sorted mobile roaming out, so why not banks?

At least I know the answer to your question and if it sounds like an episode of "Yes minister" that is no coincidence.

In all OECD countries I know there is some ministry that is responsible for infrastructure, communications and the like. The ministry can do no good. It is the weakest in the cabinet. Being its minister is an end-of-political-career job. If no such person is available and willing, the post goes to a woman.

The ministry of finance is in charge of the government budget. This makes it the most powerful ministry in the cabinet. The minister is seldom if ever a woman. The only times these ministries gave up power to the EU were at the introduction of the VAT and the euro. They still hate both. Finance is usually heavily infiltrated by former employees of big banks, who hate any consumer service and hate cash most of all.

Now guess which ministry covers mobile roaming charges and which one deals with banking fees.

Peter