According to The Daily Telegraph, the Euro has started to fall relative to other currencies. UK consumers will note with some alarm that in recent weeks the spot exchange rate has been in the area of 1.25 Euros per £. Well down on last summer, when rate was close to 1.50.
The consequences for the UK may mean higher import and holiday costs but in many respects this is good for the economy. The consequences within the Euro-Zone may well be catastrophic, particularly for weaker members that rely heavily on UK and perhaps US trade. The Telegraph highlights Spain, which enjoys a favourable balance of trade with the UK. As the Spanish are finding out, the Brits are no longer buying houses, least of all in the Costas. What scarce mortgage funds that are available will be diverted to UK house purchases. Along with Ireland, Spain has seen a huge boom in the property market. Nowhere else is the asymmetry within European economies going to be so severely tested.
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