First the good news. Converting prices into pounds is now a doddle. A couple of years ago, when as little as 70p bought you a euro, weighing up prices in eurozone countries such as France, Spain, the Irish Republic and Italy required a modicum of mental arithmetic. Now, you just need to replace the € symbol with a £ sign. Et voilà!

Or perhaps the apposite exclamation is sacre bleu! For at a one-to-one exchange rate, prices for Brits visiting the eurozone or buying goods from its 15 countries are fiendishly high.

It was very different in January 1999 when the single European currency was launched. Then a euro cost only 71p. It got better: the new currency started to slide and by March 2000 a euro cost just 60p.

Since then the pound has gradually slid back and the fall has turned into a near-collapse in recent weeks. This is not about euro strength, but pound weakness. The pound is plunging against the currencies of almost all our big trading partners. It is hardly surprising. Among other things, a country's exchange rate reflects its economic prospects, and Britain's right now are lousy. Past dependence on growth fuelled by borrowing; a housing and commercial property bubble; overreliance on financial services (five of our ten biggest companies were banks before the crunch); an already heavily indebted Government - all suggest that Britain will be hit harder and will have fewer resources to claw its way out of the downturn.

Monetary policy is adding to the pound's weakness. With every cut in interest rates, Britain becomes a less attractive destination for the trillions of dollars in footloose money that sloshes around the world's financial centres in search of the highest returns. Base rate at 2 per cent is at its lowest since the Second World War. More cuts are expected, possibly next week.

The currency is in a vicious circle. The more that international investors dump pounds in favour of other currencies, the further the exchange rate falls, triggering more anxiety and more currency sales. Momentum is building, with many analysts predicting the pound has further to fall. Currencies can swing wildly from what are seen as equilibrium points.

There is no denying the pain caused by a weaker pound. Harold Wilson's risible claim when he devalued sterling in 1967 that it made no difference to “the pound in your pocket” became a byword for political disingenuousness.

But that does not make the weakening currency a bad thing. The exchange rate is the shock absorber that helps to soften the economic bumps. By making exporters and Britain's tourist industry more competitive, it helps to restore economic growth. By making imports more expensive, it helps to divert spending to home-produced goods and services. The puny pound is a symptom, but also part of the cure.

Britain's difficulties have triggered fresh calls for the country to re-examine joining the single currency. Certainly, being part of a beefy and more stable currency bloc has attractions in such turbulent times. But if anything, the crisis has strengthened the arguments of the “no” camp. Britain has the flexibility to slash interest rates to zero. There is no such option for weaker eurozone economies, such as Italy and Greece, nor for economies grappling with property boom and bust - such as Ireland and Spain. How those economies cope with the single currency may determine whether Britain eventually dusts down its own euro plans.

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