Irish Pound (IEP): What It is, History, Compared to the Euro

What Was the Irish Pound (IEP)?

The term Irish pound (IEP) was the national currency of Ireland. Its foreign exchange currency symbol was IEP and was represented by the symbol £. It was managed by Ireland's central bank. Banknote values ranged from £5 to £100. One pound was divided into 100 pence or p. Coins were minted in values from 1p to £1.

The currency was replaced in 2002 when Ireland officially adopted the euro. Ireland's central bank now issues and manages the circulation of the euro.

Understanding the Irish Pound (IEP)

The Irish pound was the official legal tender of Ireland until 2002 before the country adopted the euro. It was issued and managed by the country's central bank, the Central Bank of Ireland—also called Banc Ceannais na hÉireann in Irish.

The bank, which still functions today, is also responsible for implementing the country's fiscal and monetary policy. It is currently responsible for producing euro banknotes and coins.

The pound was represented by the symbol £. The symbol IR£ was used in the international currency market to distinguish it from other countries whose currencies are derived in pounds. It is divided into 100 pence or pennies.

This subunit is commonly abbreviated as p. The currency was produced in banknotes with values of £5, £10, £20, £50, and £100. Pence coins came in values of 1/2p, 1p, 2p, 5p, 10p, and 50p. The bank also minted £1 coins.

History of the Irish Pound (IEP)

Irish currency dates back to the first millennium C.E., followed by the Act of Union in 1800, which joined Ireland and Great Britain into one kingdom. This first Irish pound was thus assimilated into the British Pound.

After the Irish Free State was formed in 1922, trade with the U.K. continued to dominate the Irish economy. As such, the government did not prioritize the creation of a new currency. It wasn't until 1927 that the Irish government began issuing its own Irish pound, pegging it to British sterling at parity. The government also promised full convertibility to the Great British Pound (GBP).

For decades, the Irish government managed its currency through a currency board. In 1942, the legislature passed a law to establish the Central Bank of Ireland but kept its 1:1 peg after it was created. This continued even after Ireland departed from the Commonwealth and declared its independence in 1948. Ireland still didn't change the peg even after the devaluation of the pound in 1949 and 1967.

The 1970s were a decade of monetary reform in Ireland. First was the national decimalization of the Irish pound and then came the Central Bank Act of 1971. This act delegated new powers to the monetary authority and ultimately led to Ireland’s participation in the European exchange rate mechanism (ERM) in 1978.

In 1979, the formal link with the British pound was, at last, broken and the currency was floated on the free market.

The Irish Pound (IEP) vs. the Euro

The idea to create a single, pan-European currency gathered support in 1986, with the signing of the Single European Act. This set the stage for a free economic market without trade barriers in Europe. A logical complement to this borderless market would be a single, unifying currency.

Ireland was one of the earliest countries to adopt the euro on the first of January 1999, fixing the value of the Irish pound to the euro at the rate of 0.787564 Irish pounds—about £1.27 per euro. For three years, the euro existed only as a virtual currency for bookkeeping purposes, called a numeraire. It wasn’t until January 2002 that the circulation of euro banknotes and coins began in Ireland along with the rest of the EU countries at the time. As of Apr. 29, 2023, the Irish pound was equal to 1.26 euros.

In the early years following the joining of the euro, there were worries about inflation. There are stories of business owners showing two parallel prices (in both IEP and EUR) on their goods for sale. This was an attempt to see if prices in the new currency had risen with inflation.