Pound in the pocket cheer or another lost decade gloom?

THE good news is that the pound in the tourist pocket – and the spending power of British pensioners living in Spain – has been boosted in recent days.

The European Central Bank’s decision to splash out €1.1 trillion on ‘quantitative easing’ to flood the money markets with cash has weakened the Euro, meaning more spending money for people with Sterling incomes living in Spain.

It is also good news for the tourism industry, worth around €60 billion a year to Spain. The country is starting to look even better value again after suffering from the effects of a weak pound for several years.

It should all be a timely boost for the country that is slowly emerging from recession. The average British pensioner should certainly be feeling the difference after all the gloom over the loss of winter fuel payments.

With the exchange rate at the time of writing at €1.336 to the pound (Thursday, January 29) compared to €1.245 last September there has been a significant rise in spending power.

But looking at the wider picture, the bad news is that Bank of England governor Mark Carney has warned that the Eurozone faces another ‘lost decade’ if significant structural changes in the area are not made.

Speaking in Dublin yesterday (Wednesday January 28) Carney said that the Eurozone should ease its austerity policies otherwise it could see another decade of low growth.

He said: “Since the financial crisis all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further.

“Persistent economic weakness damages the extent to which economies can recover. Skills and capital atrophy. Workers become discouraged and leave the labour force. Prospects decline and the noose tightens.

“As difficult as it has been, some countries, including the US and the UK, are now escaping this trap. Others in the Euro area are sinking deeper.”

He went on to say: “Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt trap.”

So looking to the future are things looking good or is the gloom set to continue.

There is no doubt that the expat on the street with a UK income is better off. And the many owners of businesses that rely on British tourists, whether they be bars and restaurants or car hire companies or hotels, will be looking forward with optimism if the pound continues to grow stronger and hits predicted heights of €1.40.

Some money market insiders even foresee it topping €1.60 after the Greek election results brought in a left wing, anti-austerity party.

Or should everyone be sinking into a gloomy morass at the prospect of another lost decade?

What do you think? Are you feeling richer? Are you looking forward to the future with optimism? Or do you feel the long-term outlook is not too rosy and the hatches should remain firmly battened down?

Leave your comment below and let us know what you think…

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