Bundesbank Proposes Elimination of One and Two Euro Cent Coins in Germany

In a significant move towards simplifying cash transactions, the Bundesbank has proposed the abolition of one and two euro cent coins in Germany. This initiative, put forth by the National Cash Forum, aims to make cash transactions more efficient by allowing rounding of payments to the nearest five cents.

The forum, which includes representatives from the retail sector, banking associations, cash transport companies, and consumer advocates, advocates for a legislative framework that would standardize rounding rules across Europe. The Bundesbank's communication emphasized the importance of the Federal Ministry of Finance pushing for a legal basis for this rounding policy.

If implemented, this new rule would mean that a cash payment of EUR4.99 would be rounded to EUR5.00, while a payment of EUR1.02 would be adjusted to EUR1.00. This change is seen as a way to enhance the appeal of cash transactions and streamline the cash circulation process.

Burkhard Balz, a board member of the Bundesbank, explained that the economic and environmental costs associated with producing, packaging, and transporting one and two cent coins are disproportionately high compared to their nominal value. The proposed changes aim to make cash usage more attractive and sustainable for consumers.

The National Cash Forum, established in February 2024, seeks to ensure that cash remains a widely accepted form of payment. The initiative comes amidst ongoing discussions about the future of cash in an increasingly digital economy.

Several European countries have already moved towards minimizing the use of lower denomination coins. For instance, Finland has a law that rounds cash payments to the nearest five cents, while still recognizing one and two cent coins as legal tender. Retailers in Finland are not obliged to accept these coins unless they notify customers.

Similar rounding practices have been adopted in countries such as the Netherlands, Slovakia, Ireland, Italy, Belgium, and Estonia. Public sentiment regarding small coins appears to be shifting, with a majority of respondents in a recent Eurobarometer survey favoring the elimination of one and two cent coins. Moreover, many of these coins do not return to national central banks, often ending up in piggy banks or being lost altogether.

As discussions around this proposal continue, the Bundesbank is looking to gather broader support for the initiative, which could significantly impact cash transactions in Germany and potentially lead to harmonized policies across Europe.