History

Origins of the Irish pound

From Saorstát to Irish pound

Following the establishment of the Irish Free State, a new currency was introduced in 1928. This new Irish pound was originally called the Saorstát pound ("Free State pound") and was pegged to the pound sterling and used the pounds, shillings and pence system. The currency became a reality by the introduction of coins and notes, however the pound sterling continued to be accepted on a one-for-one basis. The currency was referred to as the Irish pound from 1938 after the Constitution of Ireland changed the state's name. The Currency Act, 1927, Adaptation Order, 1938 was the actual mechanism by which change took place.

Decimalisation

Decimalisation of the currency was actively discussed in the 1960s. Chief among the Irish Government's concerns was the pound sterling, to which the Irish currency remained tied. When the British Government decided to decimalise their currency the Irish Government followed suit. The legislative basis for decimalisation in the Republic was the Decimal Currency Act, 1969. The number of pennies in an Irish pound was redefined from 240 to 100 — the pound itself was not revalued by this act. New coins were issued of the same dimensions and materials as the corresponding new British coins. The Decimal Currency Act, 1970 made additional provisions for the changeover not related with the issue of coins.

Decimalisation was overseen by the Irish Decimal Currency Board which was created on June 12, 1968. It provided a variety of changeover information including a pamphlet called Everyone's Guide to Decimal Currency. The changeover occurred on Decimal Day, February 15, 1971.

Breaking the link

In the 1970s the European Monetary System was introduced, which the Republic decided to join. The European Exchange Rate Mechanism finally broke the one-for-one link that existed between the Irish pound and the Pound sterling; by March 30, 1979 the parity link between the two currencies that had existed for over 150 years was broken and an exchange rate was introduced. By this time Irish exports to the United Kingdom (UK) were 50%, whilst imports were 47%; the Irish economy had diverged greatly since the introduction of the currency in 1928 and was less dependent on trade with the UK. Until this exchange rate was necessary, UK currency was accepted in the Republic on a one-for-one basis by many institutions.

Until this time, all post-Decimalisation Irish coins had been the same shape and size as their UK counterparts. After this, all new denomination or redesigned coins introduced were of different sizes to UK coinage. The new 20p and £1 coins were completely different in size, shape and colour to the previously introduced UK versions. When the UK 5p and 10p coins were reduced in size the Irish followed suit, with the new Irish 10p becoming smaller than the new UK version and the new Irish 5p slightly bigger than the UK version. The Irish 50p was never reduced in size as it had been in the UK and this was presumably due to forthcoming replacement of the Irish Pound by the Euro.

This period also saw the creation of the Currency Centre at Sandyford in 1978 so that banknotes and coinage could be manufactured within the state. Prior to this banknotes were printed by specialist commercial printers in England, and coins by the Royal Mint.

Withdrawal

Although the euro became the currency of the Republic on January 1, 1999, it wasn't until January 1, 2002 that the state began to withdraw Irish pound coins and notes, replacing them with euro species. Irish pound coins and notes ceased to be legal tender on February 9, 2002Irish Pound Notes and Coins (Cessation of Legal Tender Status) Order, 2001, although they will be exchangeable indefinitely for euro at the Central Bank.

On December 31, 2001, the total value of Irish banknotes in circulation was €4,343.8 million, and the total value of Irish coins was €387.9 million. The Irish cash changeover was one of the fastest in the Eurozone, with some shops illegally ceasing to accept pounds after the first week or two. With a conversion factor of 0.787564 Irish pounds to the euroOf the 15 national currencies originally tied to the euro (also including the currencies of Vatican City, Monaco and San Marino ^*), the Irish pound is the only one whose conversion factor is less than 1, i.e. the unit of the national currency was worth more than one Euro., fifty-six per cent of the value of Irish banknotes was withdrawn from circulation within two weeks of the introduction of euro banknotes and coins, and 83.4 per cent by the time they ceased to have legal tender status.

Withdrawal of coinage was slower, having a lower priority, with only 45 per cent of coins withdrawn by February 9, 2002. This figure is somewhat misleading, as at that point, almost all coinage in circulation had indeed been withdrawn – the remainder being kept as souvenirs, or in hoards. One year after the changeover, €456 million of Irish pound banknotes remained unaccounted for, including one-third of all the £5 notes which, being the smallest denomination, were likely retained as souvenirs.

All Irish coins and banknotes, from the start of the Irish Free State onwards, both decimal and pre-decimal, may be exchanged for euros at the Central Bank in Dublin.

Retrospect

Both decimal day and the euro changeover led many in Irish society to believe that prices had been improperly raised by traders taking advantage of the confusion, exchange rates notwithstanding. In the case of the euro the government took special measures to prevent any unnecessary price changes.

Footnotes