The news from Europe today is that the Euro-cent is fighting for its life. The coin, which is very similar to the U.S. Lincoln penny in value, color, and size, has already been abolished in the Netherlands, Finland, and Belgium. According to the Dublin-based Irish Independent newspaper, Ireland will soon become the next EU nation to phase out the coin. Meanwhile other EU nations such as Sweden, Denmark, and Hungary which have retained their own national currencies have also eliminated their lowest value coins in recent years. Similar moves have been made by countless other nations, not least Canada, Mexico, and Singapore.
Partly Ireland’s decision is based on the fact that, like the Lincoln penny, the Euro-cent costs far more to mint than it is worth. Thus at times of high commodity prices, racketeers have made a bundle by melting it down for its metal value. In any case the coins rapidly go out of circulation as they end up in jars or trapped in upholstery. Meanwhile they are considered a nuisance by supermarkets, which though for competitive purposes feel obligated to price to the last cent, hate the logistics of keeping tills stocked with low-value coins.
The main argument against abolishing the Lincoln penny is that it would spur inflation. But all the evidence from Europe is that this is a misconception. Each item can continue to be priced to the last cent and the final bill rounded up or down to the nearest five cents.
Elsewhere in the world, one notable nation that maintains a coin with as low a value as the Lincoln penny is Japan. Although the Japanese yen’s exchange rate value is almost exactly the same as the Lincoln penny, there are a couple of important differences. Most notably the yen is made of 100 percent aluminum, which cannot so readily be melted down by back-street racketeers (the Lincoln penny is made of cupro-nickel). The Japanese authorities moreover have a greater political obligation to keep minting the yen because it is the fundamental unit of the Japanese currency system. By contrast, the Lincoln penny, like the Euro-cent, is a sub-unit and thus can be abolished without major symbolic implications.
Several efforts have been launched over the years to abolish the Lincoln penny, most notably two by then congressman Jim Kolbe. These came to nothing but the debate continues, and President Barack Obama reportedly favors abolition. For a more detailed discussion of the case for abolition, click here.