The bail-out of the Irish Republic threatens to push the value of the euro back up against the pound at the expense of British travellers to the Continent.
The Irish government formally announced a £77 billion rescue deal by the European Union and International Monetary Fund on Sunday aimed at preventing the meltdown of the country’s banking sector.
The pound had risen close to 1.20 against the euro as the crisis unfolded after falling to as low as euro1.12 in October. But the euro appeared to be strengthening on money markets this morning, although details of the austerity measures associated with the deal have yet to be announced.
Increasing numbers of UK travellers have switched away from euro-zone destinations over the past two years, holidaying in Turkey and Egypt rather than Spain, Greece or Cyprus.
Major travel companies, including Tui Travel and Monarch Airlines, recently forecast a switch back to Spain as hotel prices in the world’s biggest package-holiday destination move more in line with rivals. Any rise in the value of the euro will put fresh pressure on hoteliers dependent on UK tourists.
The Irish crisis represents the latest stage of the “sovereign debt” crisis that began in Dubai a year ago and spread to Greece and the so-called PIGS group of nations in Europe – Portugal, Ireland, Greece and Spain. It is a sign that the underlying debt crisis that began in 2008 has not gone away.