What Was the IEP (Irish Pound)?
The IEP (Irish Pound) was the foreign exchange (FX) currency symbol for the Irish pound, the national currency of Ireland until 2002. The Irish pound was composed of 100 pennies, called pingin in Irish, and often appeared with the symbol £ or IR£ to set it apart from other currencies such as the British pound. The Irish term for the Irish pound is the punt Éireannach.
- The Irish Pound (IEP) was the national currency of Ireland, which was replaced by the euro in 2002 as part of the EU common monetary union, fixing the value of 1 euro at the rate of 0.787564 Irish pounds.
- The Irish pound itself dates back to the first millennium C.E. when Ireland unified with England.
- From 1922 until 1979, Ireland maintained a tight peg of 1 IEP to 1 GBP, at which point it became a freely floating currency until its switch over to the EUR.
Understanding the Irish Pound
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. The government therefore did not see the need to prioritize the creation of a new currency. It was not 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) sterling.
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 after creating this new monetary authority, Ireland retained its 1:1 peg IEP to the pound sterling. This practice continued even after Ireland departed from the Commonwealth and declared itself an independent Republic in 1948. When the pound sterling was devalued due to the Bretton Woods system in 1949, and again in 1967, Ireland still did not change its currency's pegging.
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 Euro Replaces the Irish Pound
The idea to create a single, pan-European currency began to gather 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. For three years, the euro existed only as a virtual currency for bookkeeping purposes, called a numeraire. It wasn’t until January 2002 that circulation of euro banknotes and coins in Ireland began along with the rest of the EU countries at the time.
In the early years following the joining of the euro, there were worries of local inflation. There are stories of business owners showing two parallel prices (i.e., 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.
According to World Bank data, Ireland experienced a 0.94% annual inflation rate and had gross domestic product (GDP) growth of a 5.5% as of 2019, which is the most current year of available data.