EU considers phasing out 1c and 2c coins

antoobrien

enda1 wrote: »

All the other members would have been changed accordingly.

Not paying attention again I see, that was never said either - the specified rate was the Irish one.

Remember the Euro currencies were in a set range for 5-6 years before the euro came in, the suggestion that the euro could/should have been devalued is a bit off and very definitely looking at things with almost 15 years of 20/20 hindsight.

Besides, with the exchange rates being picked based on market prices, if that had happened the markets would have merely bought/sold to bring the basket back to the "normal" levels.

enda1

antoobrien wrote: »

Not paying attention again I see, that was never said either - the specified rate was the Irish one.

Remember the Euro currencies were in a set range for 5-6 years before the euro came in, the suggestion that the euro could/should have been devalued is a bit off and very definitely looking at things with almost 15 years of 20/20 hindsight.

Besides, with the exchange rates being picked based on market prices, if that had happened the markets would have merely bought/sold to bring the basket back to the "normal" levels.

I think you need to reread the thread. You are simply misunderstanding. The value of all Euro released would not change regardless of the denomination.

You need to separate the two in your head. It's quite trivial to denominate in whatever system you want while not influencing the underlying value.

The Irish rate was quoted as it is most relevant to us. If the denomination relative to the Irish rate was doubled, then it would have to be doubled with respect to all other host currencies leaving the exchange rates of one currency to another (£IR to DM for example) as the same.

antoobrien

enda1 wrote: »

I think you need to reread the thread. You are simply misunderstanding. The value of all Euro released would not change regardless of the denomination.

You need to separate the two in your head. It's quite trivial to denominate in whatever system you want while not influencing the underlying value.

Stop being insulting, ardmacha specified both the rate and the denomination, not me. I picked up on the rate when there was no mention of the eurozone basket rates changing just ours.

The denomination thing is a red herring as they can be changed at any time. Are you old enough to remember the introduction of the 20p or the removal of the half-penny piece from circulation here in Ireland?

the_syco

Seeing how everything was rounded up for the pound to euro conversion, I'd say everything would be rounded up if the 1 & 2 cents were banned!

Farmer Pudsey

I think it was in Spain or the Cannaries before the Euro shopping prices as normal when it was totaled up if it came to a sum ending in 1or2 you got five cent back if it came to 3or4 you got no five cent back. Rounding up and down is fairly easy. Biggest change for retailers is no point in any longer pricing items at 19.99 you will either go to 20 or 19.95.

enda1

antoobrien wrote: »

Stop being insulting, ardmacha specified both the rate and the denomination, not me. I picked up on the rate when there was no mention of the eurozone basket rates changing just ours.

The denomination thing is a red herring as they can be changed at any time. Are you old enough to remember the introduction of the 20p or the removal of the half-penny piece from circulation here in Ireland?

It's fine if you misunderstood. Everyone makes mistakes.
We can leave it at that then.

antoobrien

enda1 wrote: »

It's fine if you misunderstood. Everyone makes mistakes.
We can leave it at that then.

Thank's for the apology:rolleyes:, next time don't talk about a link where there isn't one being claimed.

Alun

dudara wrote: »

When I lived in the Netherlands, a lot of the chains employed Swedish Rounding. Essentially, things were priced as normal, i.e. 97c. €1.28. At the till, your total was displayed correctly, but the shop assistant would round up or down to the nearest 5c and give change accordingly. I presume that the law of averages meant that it balanced out for the shop and consumer.

They did that with the guilder before the introduction of the euro anyway, so it wasn't new to them.

Alun

antoobrien wrote: »

What (eurozone) country at the time didn't have a 1/2c equivalent?

The Netherlands didn't, nothing smaller than 5 cents.

enda1

antoobrien wrote: »

Thank's for the apology:rolleyes:, next time don't talk about a link where there isn't one being claimed.

Rolleyeyes, they really are the new Godwin.

You've assumed the poster was stupid.
I've assumed the poster was using brevity as he assumed the intellect of the forum he was posting in.

Perhaps he assumed wrongly.

Max Powers

surely this will result in inflation if everything in shops is going to be dearer. excluding card transactions possibly

Scofflaw

enda1, antoobrien, leave off. You're particularly at fault there enda1 - your position is based on an assumption about ardmacha's post, not on what ardmacha actually said. Being dismissive because someone else didn't make the same assumption as you is pretty poor form.

moderately,
Scofflaw

enda1

Fine.

I'd look forward to the phasing out of these low coins as they cost a lot to administer. Was there a cost review on potential savings associated with doing away with them both economic and environmental?

Scofflaw

enda1 wrote: »

Fine.

I'd look forward to the phasing out of these low coins as they cost a lot to administer. Was there a cost review on potential savings associated with doing away with them both economic and environmental?

Sure - there's a lot more info here: http://ec.europa.eu/ireland/press_office/news_of_the_day/small-change-future-one-two-cent-coins_en.htm

The Commission has structured its analysis around four possible scenarios:

• Status quo: 1 and 2 cent coins continue to be issued under today’s conditions, without changing the legal or material context. They remain legal tender and continue to be produced with the current technical specifications (such as metal, weight and size) and without changing the production and issuance processes.
• Issuance at reduced costs: The coins continue to be issued but issuance costs are reduced through changing the material composition of the coins or by increasing the efficiency of the coin production, or both. This would address the problem confronting most euro area Member States facing losses as a result of issuance costs far exceeding the face value of the coins.
• Quick withdrawal: Under this scenario, the issuance of these denominations ceases and the coins in circulation are withdrawn, mainly through retailers and banks within a pre-established short time period. Binding rounding rules would apply as of the first day of the withdrawal period and the coins would cease to be legal tender at the end of the withdrawal exercise.
• Fading out: This scenario has the effect of a withdrawal, but achieves it in a different way. While the issuance of coins would cease and binding rounding rules apply also under this scenario, the coins would remain legal tender. They could still be used, but only for payment of the rounded final sum. Since no new coins would be issued, they would be expected to disappear gradually from circulation due to their high loss rate and lack of attractiveness as convenient payment means.

A number of key conclusions can be drawn from the stakeholder consultation and the analysis:

• The production of 1 and 2 cent coins is clearly a loss-making activity for the euro area with the difference between the face value of the coins and the price paid by the state to get them pointing at an estimated total cumulative loss of €1.4 billion since 2002.
• The attitude of the general public is rather mixed: while people are attached to these small denominations and fear the risk of inflation if they were to disappear, they handle these coins as non-value items and do not re-circulate them in payment channels. The resulting high loss rate combined with the existence of psychological prices leads to an ever-growing demand for issuance of new small coins, which today represent nearly half of the coins in circulation.
• While the economics of issuing 1 and 2 euro cent coins would plead for discontinuing issuance, cost elements need to be balanced against other considerations, notably the negative reaction from the general public that rounding rules could trigger.

The actual Commission reports are linked at the bottom of that page.

It's perhaps worth pointing out that the Commission only has phase-out as 2 of 4 options.

cordially,
Scofflaw

ardmacha

The Irish rate was quoted as it is most relevant to us. If the denomination relative to the Irish rate was doubled, then it would have to be doubled with respect to all other host currencies leaving the exchange rates of one currency to another (£IR to DM for example) as the same

.

May I clarify what I said, as this has been misinterpreted. The Euro is an artificial creation, it was pitched to be DM1.95, IR£0.77 etc. When introduced 1c was already a small coin. Had the Euro been pitched at DM3.90, DM5 or some higher value a 1c coin would have been worth more and would have continued to be useful for many years. There is little point in creating a currency with a one-hundredth component, if you then shortly decide that that component is then too small to be useful. Why pick a value where this will happen?

I did not imply a different value for Ireland specifically, the IR£1.45 was just a miscalculation.

antoobrien

ardmacha wrote: »

.

May I clarify what I said, as this has been misinterpreted. The Euro is an artificial creation, it was pitched to be DM1.95, IR£0.77 etc. When introduced 1c was already a small coin.

I remember using 1p & 2p coints right ip to the changeover, but retailers quickly started pricing items at 5c roundings because of the size of the new coins. It'd be an interesting thesis: Price increases driven by coin sizes in the early years of the Euro in Ireland.

ardmacha wrote: »

Had the Euro been pitched at DM3.90, DM5 or some higher value a 1c coin would have been worth more and would have continued to be useful for many years.

Do you see where the flaw in your reasoning regarding how the prices were set is? Your argument reads that the prices were set arbitrarily - which is clearly (then and now) not the case.

ardmacha wrote: »

There is little point in creating a currency with a one-hundredth component, if you then shortly decide that that component is then too small to be useful. Why pick a value where this will happen?

This is a bit of a red herring, the old (i.e. pre-decimal) pound had a coin worth 1/480th and until 1987(ish) the punt had a 1/200 value, which was removed approx 15 years after introduction. In 1990 or so the 20p coin was introduced - because of the amount of 10p coins being used, so denomination changes are not all that strange. Indeed it'd be worse if they didn't happen, imagine the amount of coppers (shrapnel) that sit in jars at home. Couple of hundred million perhaps? Wouldn't be a bad shot the the arm for the economy.

ardmacha

Your argument reads that the prices were set arbitrarily - which is clearly (then and now) not the case.

I didn't say prices were set arbitrarily. I said that the weight of the currency devised to measure these prices was set arbitrarily.

This is a bit of a red herring, the old (i.e. pre-decimal) pound had a coin worth 1/480th and until 1987(ish) the punt had a 1/200 value, which was removed approx 15 years after introduction

In 1971, petrol was 7p a litre, 1/2p could buy you 70 millilitres of petrol. In 2002 petrol wa €0.90 and 1c buys you 11 millilitres of petrol, so the Euro 5c is closer in value to the old 1/2p, than the 1c.

y0ssar1an22

I may be wrong about this but...
I read somewhere a while ago that Australia got rid of 1c and 2c coins because it was more expensive to produce them than they are worth.

If that is the case I assume it is the same for the Euro, in which case it should have been implemented a long time ago.

May be wrong though.:p

skafish

Schnitzel Muncher wrote: »

Do you not need to bag them first?

No, they can count and bag them by weight

Scofflaw

y0ssar1an22 wrote: »

I may be wrong about this but...
I read somewhere a while ago that Australia got rid of 1c and 2c coins because it was more expensive to produce them than they are worth.

If that is the case I assume it is the same for the Euro, in which case it should have been implemented a long time ago.

May be wrong though.:p

No. you're right - about 20 years ago. Same for NZ, I think, and Canada is on the verge of doing it. It's worth noting, however, that the EU is only considering it as one possible option.

cordially,
Scofflaw

antoobrien

ardmacha wrote: »

I didn't say prices were set arbitrarily. I said that the weight of the currency devised to measure these prices was set arbitrarily.

That statement directly contradicts itself. You do realise that the weight used is part of the pricing mechanism, right?

The fact of the matter is that they didn't use some arbitrary weighting that the markets would not accept, instead they calculated the individual conversion rates using a formula that was based on the prevailing market rates of each currency in the euro basket.

31 December 1998 - Determination of the euro conversion rates


The alternative weighting you are describing would have required a devaluation of the Euro against the remaining currencies, which the markets would not have allowed for various reasons.

ardmacha wrote: »

In 1971, petrol was 7p a litre, 1/2p could buy you 70 millilitres of petrol. In 2002 petrol wa €0.90 and 1c buys you 11 millilitres of petrol, so the Euro 5c is closer in value to the old 1/2p, than the 1c.

And my parents bought a 21" tv in the early 80s paying £600 (€770). I bought a bigger one last year for €250, how does that comparison fit into your weighting?

ardmacha

The alternative weighting you are describing would have required a devaluation of the Euro against the remaining currencies, which the markets would not have allowed for various reasons

It would not have meant anything of the sort. The Euro had a sort of ancestor in the ECU, when the Euro was introduced it could have been 2 ECU or 2.5ECU. This would have made a cent a useful value and would not have affected the relative value of any currency.

And my parents bought a 21" tv in the early 80s paying £600 (€770). I bought a bigger one last year for €250, how does that comparison fit into your weighting?

Everyone knows that electronics have declined in price, so this is useless. General prices and salaries still illustrate my point. The average weekly wage in 1971 was €30-€35, 1/2p was a much bigger fraction of that amount than 1c is today.

Scofflaw

ardmacha wrote: »

It would not have meant anything of the sort. The Euro had a sort of ancestor in the ECU, when the Euro was introduced it could have been 2 ECU or 2.5ECU. This would have made a cent a useful value and would not have affected the relative value of any currency.

But why would one bother doing that simply in order to make the 1c coin a useful value? There is, if you'll pardon the confusion, no special value to the 1c coin that means the currency should be arranged specially to provide it with a role.

And if one is going to arrange the currency just to give 1c a value greater than it costs to produce it, why not extend the principle ad infinitum to the ha'penny and the farthing? The half-farthing? The third-farthing? The quarter-farthing even?

Money is a convenience and a medium. If the lowest value coin in a system retains the same purchasing power, it's irrelevant what that coin's face value is, except for arithmetical convenience.

ardmacha wrote: »

Everyone knows that electronics have declined in price, so this is useless. General prices and salaries still illustrate my point. The average weekly wage in 1971 was €30-€35, 1/2p was a much bigger fraction of that amount than 1c is today.

And everyone knows that oil prices have risen sharply in relative price, so your original example shared the same flaw you're now pointing out.

cordially,
Scofflaw

ardmacha

But why would one bother doing that simply in order to make the 1c coin a useful value?

If a currency has cents, why pitch it at a value that makes further roundoff to 5c units necessary?
It isn't a major issue, but Europe had currencies with larger value than the Euro, the IR£, UK£, CYP, LVL, I would have made it worth as much as these at least. I imagine the USD was in fact the concept they were looking at.

Arithmetical convenience may not be all that important, but since the Euro was given a completely arbitrarily value, why not facilitate arithmetic convenience?

And everyone knows that oil prices have risen sharply in relative price, so your original example shared the same flaw you're now pointing out.

Oil with a 1971 base wasn't an ideal example, but electronics is an even worse one!

Anyhow the Eurozone has bigger problems than this, but when we leave the punt nua should be €2!

Frolick

y0ssar1an22 wrote: »

I may be wrong about this but...
I read somewhere a while ago that Australia got rid of 1c and 2c coins because it was more expensive to produce them than they are worth.

If that is the case I assume it is the same for the Euro, in which case it should have been implemented a long time ago.

May be wrong though.:p

Canada have done this, they also have plastic notes. Makes so much sense.

crockholm

I have a little hobby about collecting all the different coins from the different countries(along with the special edition coins). Please let me and my nerdish kin continue in peace,or at least let us get our mits on the Latvian ones first.

antoobrien

ardmacha wrote: »

Oil with a 1971 base wasn't an ideal example, but electronics is an even worse one!

No the electronics just emphasises how silly the oil example is by showing the relative buying power of the penny has gone up in some areas and down in others.

A more useful metric of buying power would be the guinnes price index, which shows that the average wage packet could buy 10 less pints (2002 prices) than it did in the 70s.

The proper one to use would be CPI which shows that (in 1996 prices) the "basket" that cost €100 in 1996 cost €21.90 in 1975 (start of records) and €148.5 today. But then that doesn't support your theory about the utility of the 1/2c piece or even why prices were "inconvenient" numbers (to actually make the cashiers open the till to get change, rather than just pocketing the sales).

ardmacha wrote: »

Anyhow the Eurozone has bigger problems than this, but when we leave the punt nua should be €2!

If it ever happens the exchange rate is already set at 0.787564 and the market will decide what level it should go to - regardless of the valuation chosen. If you can remember the devaluation exercise in the mid 90s, the markets took a week or so to decide that the punt was actually worth less than £1 stg and values settle back to "normal" levels.

Scofflaw

ardmacha wrote: »

If a currency has cents, why pitch it at a value that makes further roundoff to 5c units necessary?
It isn't a major issue, but Europe had currencies with larger value than the Euro, the IR£, UK£, CYP, LVL, I would have made it worth as much as these at least. I imagine the USD was in fact the concept they were looking at.

Arithmetical convenience may not be all that important, but since the Euro was given a completely arbitrarily value, why not facilitate arithmetic convenience?

I would have said that arithmetical convenience was rather better served by only using multiples of 5, myself. And surely the more you set the currency's basic value at, the less convenient it becomes? One can turn the whole argument on its head and ask why the euro was pegged at a level that made cents necessary at all? Did it ever make sense to make cents?*

ardmacha wrote: »

Oil with a 1971 base wasn't an ideal example, but electronics is an even worse one!

The one example is a bad as the other, which illustrates the weakness of the argument itself.

ardmacha wrote: »

Anyhow the Eurozone has bigger problems than this, but when we leave the punt nua should be €2!

For about 15 minutes.

cordially,
Scofflaw


*sorry, I couldn't help it

ardmacha

And surely the more you set the currency's basic value at, the less convenient it becomes? One can turn the whole argument on its head and ask why the euro was pegged at a level that made cents necessary at all? Did it ever make sense to make cents?*

The point is that these issues probably weren't considered much, the ECU was originally an accounting unit worth a bit more than one dollar. I suspect that nobody thought much about the optimal design of a circulating currency.

The one example is a bad as the other, which illustrates the weakness of the argument itself.

Because both examples are bad doesn't mean that both are as bad as the other. Petrol is a significant part of people's expenditure, more so than TVs and although petrol has gone up and down electronics has shown real long term price changes that are an order of magnitude larger than petrol.

The limitations of my example does not undermine my point. The decimal currency of 1971 had a much higher value for its decimal component than the Euro had at launch. Inflation post 1971 was especially high, which killed off the 1/2p, inflation since the Euro has been modest, yet this debate is now arising.

For about 15 minutes.

This may underestimate the power of the markets!

Scofflaw

ardmacha wrote: »

The point is that these issues probably weren't considered much, the ECU was originally an accounting unit worth a bit more than one dollar. I suspect that nobody thought much about the optimal design of a circulating currency.

And the ECU replaced at parity the EUA, which was originally set at $1.20 in 1974. I can't see particularly that the original decision of setting what eventually became the euro at somewhat over a 1974 dollar was a strange one, or a bad value for the currency, and parity replacement since then doesn't seem unreasonable either.

In effect, the euro already had a 25 year history on the markets before it hit the shops in 2001, and complaining that it wasn't set at a value that would have resurrected the usefulness of pennies is a bit like making the same complaint against the dollar or the pound. In all those cases it would have taken a special decision to make the penny useful again - and would have seemed particularly strange in those countries where small value coins hadn't been in use for years already.

ardmacha wrote: »

Because both examples are bad doesn't mean that both are as bad as the other. Petrol is a significant part of people's expenditure, more so than TVs and although petrol has gone up and down electronics has shown real long term price changes that are an order of magnitude larger than petrol.

The limitations of my example does not undermine my point. The decimal currency of 1971 had a much higher value for its decimal component than the Euro had at launch. Inflation post 1971 was especially high, which killed off the 1/2p, inflation since the Euro has been modest, yet this debate is now arising.

The original value of the decimal pound seems to have been $2.40, which was a drop from its previous value of $2.80. That's not a huge difference, and to be honest the British penny is very nearly as useless as the 1c at this stage. It's saved slightly by the decision in 1992 to replace the coin with a cheaper one - pre-1992 pennies were worth 1.5p by 2006 in copper value alone.

ardmacha wrote: »

This may underestimate the power of the markets!

True, it may not last the whole 15 minutes.

cordially,
Scofflaw