The Bank of Latvia wants to reduce the use of euro coins of one and two cents. Dozens of tons of coins are being lost by the population every year.
The Bank of Latvia wants Latvian authorities to find a solution to reduce the circulation of one-cent and two-cent euro coins, Zita Zariņa told the public-service Latvijas radio.
According to the Bank of Latvia board member, they mint about 10 million one-cent coins and 8 million two-cent coins yearly, roughly equivalent to the number of coins Latvian residents lose annually.
All these coins left behind in old wallets, jeans pockets, under furniture, or in the streets account for 260,000 euros (283,000 dollars) of money disappearing from the Latvian economy every year. The two smallest denominations of the euro currency also account for 47 metric tons of copper-covered steel coins lost yearly.
One of the options would be to withdraw these coins from circulation. According to the Bank of Latvia, which asks public opinion about the question every year, the population is roughly split in half between those in favor and those against.
But this solution would require a broad agreement across the entire euro area. And the European Commission hasn’t come to one, yet.
The debate about the future of one and two-euro cent coins is almost as old as the euro, which became available in 2002.
In 2013, the European Commission published a memo after having studied the issues of the continued issuance of these denominations. Producing one and two-euro cent coins was clearly a significant loss-making activity for the euro area Member States. They cost more to mint than their face values in many euro area member States, leading to what is called negative seignorage income.
Changing the production process or the material of the coins to reduce the costs would require a similar eurozone-wide agreement. The Bank of Latvia is pushing to introduce the rounding rule, which can be implemented by individual countries, to reduce the circulation of the coins.
But the population usually fears the disappearance of these small denominations would lead to increased prices, a scenario even more realistic in the current context of high inflation in Europe. For traders, this would reduce the possibility of showing psychological prices (e.g. 12.99 euros).
The two coins are by far the most minted and the demand has always been growing. According to the European Central Bank, the one and two-cent coins accounted for 48 percent of the 145 billion in circulation in the euro area as of February 2023, a share that constantly been growing since 2002.
But the Commission had pointed out a paradox: Although people seemed attached to these coins, they did not re-circulate them.