Central Banking

Calls for notes to replace low value euro coins

European finance ministers have called for the introduction of low value euro notes instead of coins to reduce pressure on inflation, according to a report in the Financial Times. The idea is that people do not value coins highly and are therefore more likely to spend them. "People just aren't used to handling high-value coins," Giulio Tremonti, the Italian chairman of the eurogroup finance ministers' meeting said.
European finance ministers have called for the introduction of low value euro notes instead of coins to reduce pressure on inflation. The idea is that people do not value coins highly and are therefore more likely to spend them. "People just aren't used to handling high-value coins," Giulio Tremonti, the Italian chairman of the eurogroup finance ministers' meeting said.

Source: Financial Times

Europe's finance ministers came up with a novel answer last night to the woes facing the EU economy: replace euro coins with pieces of paper.

The 12 ministers from the single currency area decided people were too ready to part with their one- and two-euro coins, thus fuelling inflation.

They believe that if the coins were replaced with bank notes of the same denomination, people would be less likely to spend them.

Giulio Tremonti, the Italian chairman of the eurogroup finance ministers' meeting, said the new notes should be introduced "the sooner the better".

The European Central Bank was ordered at the meeting in Luxembourg to come up with a plan to print the new banknotes, although no timetable has been set.

The idea runs counter to the strategy adopted in countries such as Britain, where longer-lasting coins have been phased in to replace £1 notes.

But Mr Tremonti explained that in countries such as Italy, people were used to thinking that coins were almost worthless, leading to a rise in shop prices.

The idea was also supported by Greece, with its own tradition of low-value coins, and by Austria, and there was little resistance from other countries.

"People just aren't used to handling high-value coins," Mr Tremonti said. "We are not used to seeing coins as something that are worth a lot."

He said older people were particularly susceptible to parting with their euro coins without considering the true cost of what they were buying.

The changeover to the euro had led to a rise in prices in many shops, he said.

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