Dec. 30--The collapse of the pound against the euro has been so precipitate that the scale of the decline has barely been recognised. With retailers falling over like ninepins, house prices in freefall and daily warnings of surging unemployment, it has been below the radar.

But last night it was only a question of when rather than if the pound would hit euro parity.

Sterling has fallen 17pc against the euro this month alone, one of the most spectacular devaluations of recent times, and 32pc this year. It has also tumbled against the dollar to $1.46.

Anyone planning a skiing holiday or a New Year in Majorca will notice the difference immediately. Across the Irish Sea the sickly pound has led to a stampede of shoppers heading across the border to Newry for bargain buys.

In past decades a currency crisis on this scale would have threatened governments. Sombre looking prime ministers would take to the airwaves to declare, in Harold Wilson's infamous phrase, that the pound in your pocket has not been devalued. In this sterling crisis ministers are not to be seen.

So why is the pound so weak? As a freely floating currency in a world dominated by much bigger foreign exchange blocs -- the dollar and the euro -- sterling is pulled in all kinds of directions. It is not helped by the authorities who insist on using hyperbole to describe the nation's plight, reaching back into economic history to find precedents of similar magnitude.

The scale of UK government borrowing has not just aroused the Church of England's turbulent priests, but disturbed the International Monetary Fund and financial markets. The expectation that some time soon Britain may join the Americans and engage in "quantitative easing" -- the posh phrase for printing money -- is also causing apoplexy. Certainly, the pound's weakness could give the Bank of England some pause before it cuts Britain's bank rate (reduced to 2pc on December 4) yet again.

The authorities may not feel this is the right time to open an even larger interest rate differential with euroland.

Historically, a substantial devaluation of sterling has been good for Britain. The latest fall in the currency ought to be particularly helpful in that Europe is now the dominant export market for UK goods and services.

The immediate problem, however, is that parts of Europe have been quicker into recession than Britain, which means that even with high-street-style discounts, demand for our goods is likely to remain limited. But one should not underestimate the loosening of policy and the recovery potential of a bold devaluation.