Wednesday, 20 May 2009

Why Poland cannot afford the Grosz

One four hundredth and ninety-sixth of a pound
When in Poland, pop by your local kiosk Ruchu and buy some tissues. They should cost around 60 grosze for a packet of ten. Take out one tissue. Cut it in half; now carefully cut that half into three equal pieces. Each measures two and half inches by four inches (60mm by 100mm).

Now take out of your wallet a one grosz coin. Look at it glinting proudly in your hand; on one side the wording "RZECZPOSPOLITA POLSKA", an image of the Polish eagle, and the date. On the other side, a large numeral "1", the word "GROSZ", and an oak leaf. Behold this noble artefact - and consider that it buys you but ten square inches of tissue paper.

When someone tries to convince me that a grosz coin is worth one-hundredth of a zloty, or one four-hundredth and thirty fourth of a euro, or one four-hundredth and ninety-sixth of a pound, I say "what absolute twaddle".

Take its scrap value alone (warning: smelting the coinage of the Republic of Poland is illegal). OK, theoretically. A one grosz coin, according to the National Bank of Poland, is made of a manganese-brass alloy, MM59, weighs 1.64 grams and has a diameter of 15.5 mm. Looking at websites of UK scrap metal dealers, I can see that a tonne of scrap brass is worth £1,800. By my calculations, then, the scrap value (at today's exchange rates and scrap prices) of a grosz coin is 1.47 grosze.

OK, so you can't sell them for scrap yet. But once Poland joins the eurozone...

But smelting these elegant little coins is to deliver them unto an ignominious end they scarce deserve. They are just too lovely to be melted down. So what do Poles do? Poles hoard them.

Why not return them into circulation? Because, unlike the UK, where the banking system is equipped with the infrastructure to keep small-denomination coins circulating, the Polish banking system actually punishes people for saving coins.

In Saturday's Gazeta Wyborcza, there was a letter from a pensioner who'd saved several score zloty in assorted coinage, and then tried to change them in a bank. He was quoted 20 zł for the service. Where's the incentive for children to hoard coins in piggy-banks, thus getting into the saving habit?

When still living in London, I would turn out all the loose change from my pockets at the end of the working day and, when I had, say a few fivers in silver or a couple of pounds in copper, I’d bag them up and take them to the bank, where the coins would be weighed and the cashier would hand me over a banknote to the same value, or credit the money to my current account. A weighing machine, present at every window of every bank on every high street, could distinguish whether a bag purporting to be ‘Five Pounds Silver’ contained exactly fifty 10p or twenty-five 20p coins. Attempts at cheating the system centred around the inclusion of Irish 10ps or 20ps when the Punt was having one of its weaker spells. Cashiers were instructed to peer through the clear plastic, looking for images of harps or Eamonn de Valera on otherwise identically-sized coins. Other than this, in the UK, the system worked well.

In Poland, there are no plastic bags saying ‘10 zloty in 20 grosze pieces’, no infrastructure of weighing machines. I asked at PKO BP bank about cashing in small coins and got the following answer: "Come with your coins in the early mid-morning on a Tuesday or Wednesday, though neither at the beginning nor end nor indeed the middle of the month and we’ll count them for you." [Subtext: Don’t bloody bother].

All of this means that year on year (and it's been 15 years since Poland reintroduced coins into circulation), the amount of coinage sitting around in Polish homes has been growing and growing. And since there's NO WAY that the minting of a one or two grosz coin can cost less than face value, the NBP is reluctant to mint more. The upshot is a shortage of small denomination coins.

Which we all feel when shopping. "Czy Pan nie ma drobnych?" is an all-too frequent refrain in shops and cafes. The instinctive answer of Brits - "it's the responsibility of the shop, not the shopper, to carry a cash float" - should be met with the riposte "it's the responsibility of the National Bank of Poland to assure the free circulation of small denomination coinage throughout the economy."

There is a very simple and cheap answer, simpler and cheaper than installing scales in banks. Scrap the one and two grosz coins altogether. Let the smallest denomination be five grosze. At a stroke, all those long hours wasted in księgowość and in tax offices because there's a grosz or two missing in the management accounts, will become a thing of the past. Inflation will fall, because retailers will be forced to cut prices from 1zł 99. to 1zł 95. The cost of handling and accounting for these tiddly coins will fall. The smallest Polish coin will be worth around one British penny and slightly more than one eurocent. Logical eh?
[Photo taken with Nikon D80 and my old 55mm f3.5 Nikkor macro lens. Said to be one of the sharpest lenses ever made for the 35mm camera. Being able to use old Nikkors on new digital Nikons is a wonderful feature.]


Neighbour said...

Every year, September to December if I remember well, kids in primary schools bring "grosze" for "Góra Grosza" - an action to fund small, family run orphanages.

So give your daily change to Ziggy and believe me, your grosze will be well spent.

Best regards,

Michael Dembinski said...

A worthwhile charity indeed.

I support charities by bank transfer; its more efficient (plus the taxman helps out!)

Think of the time spent by the volunteers to count the cash! And the banks will also no doubt insist on charging money to handle the small coins.

I find it easier to part with a grubby ten-zloty note as I stuff it into a collecting tin, than giving away four or five zlotys-worth of loose change. Somehow loose change appeals to the hoarder instinct in me!

Neighbour said...

Every month I support Hospicjum Dla Dzieci with a bank transfer. But this "Góra Grosza" has different aim.
It's the kids job to collect money from everyone and bring to school. Kids collect it sometimes whole year and then bring it to school in September. Believe me, big bags full of brass ar transported to Narodowy Bank Polski at the end of the action, the bank handles góóóry grosza for free (or at least did it for free when Professor Balcerowicz was the CEO).
Kids learn that joint effort can do a lot. And they see results immediately, beacuse wverything is transparent and clearly presented to them.

So, pick an empty jar from your vault, leave it in your kithchan and dump the shopping change, anything less than 50 grosze. Ziggy will love it :-)

Best regards,

Neighbour said...

Oops, sorry for typos, I can't get used to any other keyboard than my laptop :-)

jan said...

Don't you exaggerate ? You can change your spare coinage at post offices. Well, all right, you'll have to wait for the service for some 30 mins at the average, but they must accept it. And again, even though its true there's no "bags" filled with coins you can still get your coinage in the form of a "knuckle booster" (a baton of few dozen coins wrapped in paper).

More than that: did that pensioner have an account in that bank, they would be obliged to accept any sum in any coinage as deposit. My reading of the subtext in the answer from your PKO BP (worst bank there is on the market, BTW) would be this: what you want takes time, and we don't want other people to wait just because you have a relatively unimportant problem of that sort. So if you don't want to cause obstruction, please come when few other customers are expected. Reasonable rather than rude.

And the real problem is that still too few people use credit and debit cards - and it is not the National Bank that is to be blamed for that but Visa Intl and their subsidiaries who charge high fees for every single operation and who delay transfers, making small electronic payments unprofitable for businesses. (Try buying a newspaper with your card...)

Michael Dembinski said...

I'm surprised at the fact that micropayment solutions haven't yet taken off - I remember writing about early experiments such as Mondex in the mid 1990s.

My guess is that proximity-payment devices built into mobile phones are the way to go for payments up to €5 - €10. I know that lawyers and bankers are working on the details. Top up online and use for thinks like vending machines, car parking or newspapers.

Mass transit proximity card systems such as Warsaw's Karta Miejska or London's Oyster can also be easily extended to work as a general micropayment system.

The 'batoniki' of small change works in one way only - bank to retailer. You cannot at home wrap up grosz coins into paper tubes to exchange them at the bank.