by Simon Morgan
FRANKFURT, Aug 24 (AFP) - The move towards eliminating one- and two-cent coins in the euro area appeared to gather momentum on Tuesday when a Bundesbank official said Germany was considering doing away with the fiddly, but costly coins.
Finland effectively stopped using the copper coins almost as soon as euro banknotes and coins were issued at the beginning of 2002, resuming the practice familiar from the Finnish markka era when prices were rounded up or down to the nearest five after the decimal point.
The Netherlands are now to follow suit. After a successful pilot project involving 150 retailers in the town of Woerden, the Dutch are to do away with the small change from September 1.
Neighbouring Belgium said it could be next. And now Germans, too, traditional hoarders of coins, seem to be coming round to the idea that "no cents makes good sense".
"We could imagine such a solution for Germany," Wolfgang Soeffner, head of coins and notes department at the German central bank, told the business daily Handelsblatt on Tuesday.
The main problem with the one- and two-cent coins is that they have become more expensive to produce than their face value as a result of the runaway price of steel.
Furthermore, because they are perceived as being too fiddly, many consumers prefer to pay with banknotes and higher-value coins at the check-out, simply stashing the tiny coins at home.
Such squirrelling has led to such a severe shortage of the one- and two-cent coins that the Bundesbank felt compelled to start a campaign earlier this year to persuade people to make greater use of them when out shopping.
In addition, the costs of handling and transporting the coins were also high, Soeffner complained.
The German finance ministry in Berlin insisted Tuesday that there was no question of abolishing the coins for the time being, pointing out that Germans were traditionally fond of one- and two-pfennig coins during the deutschemark era.
But the idea nevertheless seems to be gaining currency, at least among German's private banks.
"We believe it would make sense, for cost reasons, and there are also examples which show that we can do without them," a spokesman for the BdB banking federation, Thomas Schlueter, told AFP.
Nevertheless, the movement does have its opponents, with critics arguing that, in practice, it could fuel inflation, since retailers were more likely to round prices up rather than down.
In France, the head of the UFC-Que Choisir consumers federation, Alain Bazot, was sceptical.
"We would be against the abolition of the coins because it is illusory to believe there would be no effect on inflation," he said.
"I don't see how you could prevent prices from being rounded upwards."
In Finland, the price-rounding system is used only in cash transactions. And even then, only the total bill is rounded at the check-out, not the price of individual goods.
And in credit card transactions, the exact amount is deducted as it stands.
The German retail industry federation HDE was similarly critical of the proposals.
It expressed concern that consumer confidence in the still fledgling currency could be eroded, since it would rekindle consumers' fears that the retailers took advantage of the introduction of euro banknotes and coins to disguise steep price increases.
According to the findings of a poll to be published in the latest edition of the business weekly WirtschaftsWoche, 54 percent of Germans want to hold on to the one- and two-cent coins, while 39 percent were in favour of their abolition.
For its part, the European Central Bank was keeping mum on the issue.
While the guardian of the euro is responsible for printing banknotes, the minting of the coins is done by the national central banks of the countries concerned, even if they are acting solely as the agent of the ECB.
But more complex issues still need to be resolved on the matter, such as the effect the withdrawal of the coins would have on the money supply. And while the one- and two-cent coins might eventually disappear from everyday use, they would still remain legal tender.