A JOURNEY THROUGH THE RECENT HISTORY OF CYPRIOT CURRENCY
THE CYPRUS POUND WAS INTRODUCED BY THE BRITISH COLONAL AUTHORITIES IN 1878
A LIRA OR A POUND?
HUMBLE BEGINNINGS
The economic journey of the ‘Cyprus Pound’ began after its conception in the late 19th century. Also known as the ‘Cyprus Lira’, it holds a significant place in the economic and cultural history of Cyprus. The currency, not only took the island on its economic journey but also played a significant role in its social dynamics. From its humble beginnings to its eventual replacement by the Euro in 2008, the currency helps tell the fascinating story of the island’s economic development and its integration into today’s global financial system.
A CULTURAL DEVELOPEMENT
Several Cypriots still remember the era of the Cypriot Pound with great nostalgia. Some recall a time when it represented a sense of national identity whilst giving the island economic stability through the ages. Many view the Cypriot pound as quite essentially Cypriot, but it was originally introduced to the island by the British colonial administration a year after they took control of hte island. These original banknotes bore the hallmarks of the British Empire and each one depicted the head of the British monarch.
A CYPRIOT CURRENCY
TRACING BACK CENTURIES
The roots of Cypriot currency trace back centuries. The Phoenicians, Egyptians, Romans, and Byzantines all used early forms of currency on the island. However, it was not until the British colonial period that the concept of a standardised currency emerged. Although Cyprus was not officially a British Crown Colony, an unofficial version of the Cyprus Pound, bearing all the hallmarks of proper currency, was distributed on the island In 1879.
MINTED BY THE ROYAL MINT
This new British version of the Cypriot Pound was pegged to British Pound Sterling at a fixed exchange rate. It consisted of banknotes and coins minted by the British Royal Mint. Cyprus was formally recognised as a British Crown Colony in 1925. This meant that the Cypriot Pound became the official currency of the overseas colony.
A NEW REPUBLIC
After Cyprus gained independence in 1960, the Cyprus pound was retained but all British hallmarks were eventually removed. The Central Bank of Cyprus that was installed in 1963 took over the responsibility of issuing currency. They introduced a new revised version of the currency, eventually withdrawing the British version. The bank introduced a series of new banknotes and coins consisting of denominations of 1, 5, 10 and 20 Cyprus pounds.
A REPRESENTATION OF CYPRIOT CULTURE
The Cyprus Government wanted the new banknotes to represent Cypriot culture, history, and archaeology. They designed the new currency to highlight the new nation’s unique identity. As a result, the new banknotes were designed to celebrate the island’s traditions, landmarks, and mythological significance.
ISMET GUNEY
ISMET GUNEY was commisssioned to design the new banknotes. He had already designed the new republic’s national flag in 1960. He decided to keep the overal British design and colouration of each banknote but he introduced new figureheads that reflected the island’s direct heritage. This helped to further establish the currency as a symbol of national pride amongst Cypriots.
SIGNIFICANT GROWTH
The Cypriot pound helped put the Cypriot economy on the map in the latter part of the 20th century. As a result, the island’s economy experienced significant growth throughout the 1970s and 1980s. This was mainly driven by different prominent economic sectors at the times. These included tourism, shipping, and several financial services. Cyprus also became a very attractive offshore base for several international companies. All of these factors resulted in a resiliant Cypriot Pound that helped to create economic stability throughout the island. This also led to the Cypriot pound becoming an important medium of currency exchange both domestically and internationally.
A EURO OR A POUND?
In 2004, Cyprus joined the European Union. This signalled a new chapter in the island’s economic fortunes. As part of the accession process, Cyprus committed to the adoption of the Euro. On January 1st, 2008, the Euro officially replaced the Cyprus pound.
THE END OF THE CYPRIOT LIRA
Although opinions among economists differ regarding the impact of this, most agree that the transition was not as smooth as could have been. One of the main points of contention is that the Cypriot pound was pegged with a fixed exchange rate against the Euro. This immediately raised inflation on the island. Domestically prices were rounded up to the nearest euro and this created a sharp rise in the island’s price index. This along with several negative European economic factors, eventually set in motion a tumultuous economic crash, Overall, the the Cyprus Pound, whether viewed through a lens of nostalgia or integration, still serves as a poignant reminder of the island’s prosperity and its journey through a globalised economic world.
OPINIONS DIVIDED
It has been found that opinions regarding the impact of the currency conversion, from the Cypriot Pound to the Euro, are subjective and vary. Different views often depend on the personal perspectives and circumstances of each individual. With this in mind, there is still much debate among Cypriots regarding the benefits and drawbacks of the currency’s conversion further adding a complex narrative to the Cypriot Pound’s legacy.
THE ARGUMENTS FOR
Economic Stability: The Euro is managed by the European Central Bank, which aims for price stability, reducing inflation and promoting economic stability.
Increased Trade: The Euro facilitates trade among member countries, as it eliminates the need for currency conversion, potentially boosting economic growth.
Greater Investment: A common currency can attract foreign investment, as investors see a larger, integrated market with reduced currency risk.
Price Transparency: Consumers can easily compare prices across countries, promoting competition and potentially leading to lower prices.
Political Integration: Adopting the euro can strengthen political ties among member states, fostering cooperation and unity within the European Union and facilitating greater integration into the global financial system.
Elimination of Exchange Rate Risks: A single currency offers both stability and convenience for all European businesses and consumers. It also offers the benefit by the elimination of currency exchange fluctuations within the Eurozone, making trade easier and more predictable.
THE ARGUMENTS AGAINST
Loss of Monetary Sovereignty: Countries lose control over their monetary policy, as the European Central Bank, which may not always align with national economic needs, makes decisions regarding interest rates and the currency.
Purchasing Power: Individual currencies generally have more purchasing power.
Economic Policies: The Euro reflects the greater Eurozone’s economic policies that may not suit all member states, particularly those with different economic conditions or cycles.
Economic Disparities: Countries with weaker economies may struggle to keep up with stronger economies, leading to increased disparities and potential economic instability.
Adjustment Costs: Transitioning to the euro was costly and the significant changes in accounting, pricing, and financial systems have caused repercussions that are still being felt today.
Potential for Financial Crises: If a member state faces a financial crisis, it cannot devalue its currency to regain competitiveness, which can exacerbate economic problems.
Price Hikes: The Euro has effectively reduced the relative value of earnings because of European-wide price levelling and general price hikes.
