Eurozone moves to eliminate low-denomination coins
Many countries have taken the initiative to eliminate low-denomination coins to cut costs. Canada is one of the most recent to take such action by halting production of its penny, as making the coin started to cost more than its face value, rendering its circulation an inefficient way to manage government funds.
However, Canada isn't the only country to recently come up with a plan to eliminate this currency. The European Union recently announced an initiative that could see low-denomination coins taken out of circulation. A new proposal outlines a plan for 17 eurozone countries to stop producing and using one- and two-cent coins. If the plan is approved, five-cent pieces would be the smallest coins in circulation, but it has proved controversial among different eurozone countries.
Some advantages to the plan
The EU faces a problem many other countries with low-denomination coins struggle with - the face value of the smallest coins no longer exceeds production expenses. Reuters reported the plan detailed the cost of making one- and two-cent coins for the past 11 years has cost EU member states the equivalent of $1.8 billion. This has led some countries, like Finland and the Netherlands, to already stop issuing the coins.
Aside from the costs, citizens of many countries fail to ever reuse these coins. Reports indicate many consumers toss low-denomination change in a jar or to the side, but don't often redeem it at a self-service coin counting machine or use it to make purchases.
While the reports indicate many countries don't see a high use of these coins, citizens of some EU member states do often pay with them, making the resolution a difficult sell to these countries. Reuters reported individuals in France and Germany often use small change to complete transactions, and eliminating low-denomination coins could cause distress among consumers.
One of the biggest concerns is that the plan would save money on production but drive up consumer prices. Businesses would likely round higher, rather than risk lowering prices, which could contribute to inflation. This is a significant worry for many, as most eurozone countries are still struggling to lift their economies out of a recession.
Even though some countries have made the move to eliminate their one-cent coins, that doesn't mean the United States will follow suit. With the emotional attachment to the penny and controversy surrounding proposed legislation that has called for its end, it remains likely American businesses will be able to retain their traditional coin counters to process daily sales that include pennies.
June 10, 2013