Holidaymakers cash in on euro woes

Holidaymakers heading to the continent will see their cash travel further after the pound hit a near four-year high against the battered euro.

The pound was worth 1.28 euro as currency markets continued to fret over the ongoing eurozone debt crisis and whether Spain will need its own bail-out package.

Some two million British holidaymakers are set to head overseas over the weekend as the majority of English schools break up for the summer holidays.

The exchange rate - in which sterling was last higher in late 2008 - will see Britons receive 11.5% more value for their money compared to last year, the Association of British Travel Agents (ABTA) said.

This means British holidaymakers will pay just £1.55 for a beer in summer holiday favourite Spain, where the average lager costs 1.99 euro.

ABTA chief executive Mark Tanzer said: "Eurozone destinations are proving popular with holidaymakers looking to take advantage of the pound's strengthening against the euro, coupled with the fact that many bars and restaurants have lowered their prices."

The rate paid by Bureau de Change operator Travelex is slightly lower at 1.24 euro to the pound.

The single currency has weakened over the last year as Greece faced the prospect of a eurozone exit and investor fears pushed Spanish borrowing costs to unsustainable levels.

Craig Erlam, market analyst at foreign exchange broker Alpari UK, said: "Borrowing costs in the eurozone are continuing to weigh heavy on the currency."

Eurozone finance ministers approved a bailout for Spanish banks amid soaring borrowing rates on bond markets in a sign investors are worried the government itself may need rescuing. The yield on 10-year Spanish bonds was up at 7.1% - around the same level of return demanded by investors for debt in Greece, Portugal and Ireland when they were forced to seek a bailout.