Opinion of the European Central Bank of 12 December 2023 on the rounding of cash payments in Lithuania (CON/2023/43)

OPINION OF THE EUROPEAN CENTRAL BANK of 12 December 2023 on the rounding of cash payments in Lithuania (CON/2023/43) Introduction and legal basis

On 9 November 2023 the European Central Bank (ECB) received a request from the Chair of the Budget and Finance Committee of the Lithuanian Parliament for an opinion on a draft Law on the rounding of cash payments (hereinafter the ‘draft law’) . The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first and second indents of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to currency matters and means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The purpose of the draft law is to introduce the rounding of final amounts paid for goods and services in cash. Regardless of the quantity of goods and services purchased with a single cash payment, the draft law proposes to round only the total final cash payment, i.e. the price of individual items constituting the final cash amount to be paid is not rounded. The total final cash payment amount is to be rounded down or up to the closest multiple of 5 cent. The rounding does not apply if the total final payable amount is less than 5 cent. 1.2 The explanatory memorandum explains that the purpose of the draft law is to minimise the need to use 1 and 2 cent coins, with the aim of (a) reducing costs for the public, businesses and the State in relation to cash administration and the payment settlement time; (b) simplifying the issuance of coins for cash payments insofar as the need to continually mint or procure these coins will decrease; and (c) reducing the use of resources and packaging materials, thus having a positive environmental effect on pollution, waste, CO2 emissions and the accumulation of lost coins in the environment.

2. General observations

2.1 The draft law is not likely to have a real impact on inflation in Lithuania, particularly considering that the rounding of prices is symmetrical and confined to final cash amounts to be paid.

2.2 In accordance with Article 128(2) of the Treaty, the competence to adopt measures to harmonise the denomination and technical specifications of all euro coins intended for circulation to the extent necessary to permit their smooth circulation within the Union is vested in the Council of the European Union, on a proposal from the European Commission and after consulting the European Parliament and the ECB. The legal tender status of euro cent coins within the euro area is laid down in Article 11 of Council Regulation (EC) No 974/98 . In addition, Article 2 of Regulation (EC) No 974/98 provides that the euro, as the currency of the euro area, is divided into one hundred cent. The denomination structure of the euro coins (i.e. 1, 2, 5, 10, 50 euro cent, 1 euro and 2 euro coins) has remained unchanged since the introduction of the euro . However, the use of different denominations of euro coins, as currently devised, should be periodically and carefully examined by the competent institutions against the criteria of cost and public acceptability. In particular, the Commission should conduct an impact assessment on the continued issuance of 1 and 2 euro cent coins . In this regard, the Commission has performed a public consultation on uniform rounding rules for cash payments in euro, with the response period having closed on 11 January 2021. 2.3 With a view to preserving the unity and integrity of the single monetary area, and considering the abovementioned ongoing work of the Commission, the ECB recommends that any rounding rules are established in a harmonised manner at Union, rather than at national level . Accordingly, any mandatory rounding rules on euro coins would appear to call exclusively for Union rather than national legislation given that the euro coins are the only legal tender coins in the Member States whose currency is the euro. 2.4 The ECB also considers it important to stress that mandatory rounding legislation must not prevent the 1 and 2 euro cent coins from being accepted as a means of payment as they are de jure legal tender in the entire euro area. In this respect, Member States’ legislation must not lead to divergent treatment of euro legal tender. In this regard, the ECB understands that the provisions of the draft law do not discharge individuals and businesses from the obligation to accept 1 and 2 euro cent coins even after the draft law introduces mandatory rounding. This means that 1 and 2 cent coins remain universally accepted legal tender in Lithuania. The ECB considers it crucial that 1 and 2 euro cent coins remain universally accepted legal tender for so long and insofar as they remain legal tender under Union law.

2.5 Finally, the ECB notes that the reduced use of 1 and 2 euro cent coins as a result of rounding would reduce resource consumption and be supportive of a more efficient use of cash. This is in line with the goals of the Eurosystem’s Cash 2030 strategy to make the cash cycle as cost efficient as possible and to look at the environmental footprint of cash to identify opportunities to reduce its environmental impact. This opinion will be published on EUR-Lex. Done at Frankfurt am Main,12 December 2023. [signed]

The President of the ECB

Christine LAGARDE