16th June 2010
We British do enjoy beating ourselves up about the state of our economy.
Every time the pound slips further against the dollar or the Swiss franc, or whatever, we tend to assume that it's just another reflection of our lousy economic management, our infamous government debts, our lack of support for business, and so forth.
What we don't seem to do is take a good critical look at our continental neighbours to find out whether things in Euroland are really as intimidatingly rosy as we seem to remember?
Well, they're not.
Forget about all that formidable economic frontage that we used to get from Frankfurt, and concentrate instead on the shocking ‘debt contagion crisis' that started this spring when Greece finally confessed to having cooked its economic books for the last umpteen years.
Think about this spring's mad scramble in Brussels to cobble up a support package that would stop a Greek-inspired domino effect among the other heavily indebted members of the euro club – notably Portugal, Spain and Ireland.
Not to mention Italy…
The country's government now owes 118% of its annual GDP, according to Citywire.
And that's an awful lot more euros than Greece, which owes 125% of GDP but is far smaller.
In short, the worst is yet to come for the euro.
The currency markets have already decided as much. Why, even our feeble old pound is worth 10% more in euro terms than it was in March.
And the 82p that you currently pay for a euro is still far too high for the underlying economic fundamentals. Just take a look at this chart on the European Central Bank's website. It's 10% higher than its historical average of 74p during the euro's first ten years of existence.
And for most of that time Europe's economy was forging ahead of us. Now that Europe isn't feeling so cocky, it's really very clear that the lofty euro is going much deeper.