Mamma Mia! If you thought things were bad here, take a trip across the North Sea to Sweden, where the central bank yesterday cut interest rates by an unprecedented 1.75 percentage points to 2 per cent.

That was far more than the one percentage point cut that the market had expected but it is not really a surprise given that, like the UK, Sweden is in recession.

As in Britain, Swedish employers are shedding workers at a rate not seen since the early 1990s, consumer confidence has fallen through the stripped-pine floorboards and unions are urging state aid for manufacturers.

Like Gordon Brown, the Swedish leader, Fredrik Reinfeldt, plans a huge fiscal stimulus to revive the economy, with tax cuts and raised infrastructure spending both likely.

Predictably, the Swedish krona fell to a fresh low against the euro on the rate cut, continuing a rout that has seen it lose 14 per cent of its value against the single currency in less than four months.

That is even worse than the fall suffered by sterling against the euro during the same period. And, for an economy as dependent on exports as Sweden’s, it is probably no bad thing.

Curiously, though, while the usual siren voices here are trying to lure Britain on to the rocks of euro entry, there seems to be no such debate in Sweden – which, of course, voted against joining the euro five years ago. That may well be because the Riksbank, like the Bank of England, now appears to be in control of events.

Contrast their bold rate cuts with the rather half-hearted three-quarter point reduction offered up yesterday by the European Central Bank.

We should not be surprised at the ECB’s timidity. These are the people, it is worth recalling, who actually raised interest rates by a quarter of a point in July – at a time when, as we now know, Germany and Italy were already in recession and the Spanish and Irish property markets were in meltdown.

The ECB has been behind the curve from the start and continues to be. It is bewildering that it did not reduce rates by more yesterday given that, as in the UK, there is now a serious risk of eurozone inflation undershooting target levels.

Its feeble response to events should be borne in mind as sterling approaches parity with the euro – when demands for UK euro entry are likely to intensify.

We should not be fooled. The exchange rate alone is not a reason for joining the euro. And, in any case, it is highly unlikely that the eurozone’s exporters would want to lock in, forever, a conversion rate offering such a competitive gift to their UK counterparts.

The pound hit an all-time low against a basket of currencies yesterday ahead of the Bank of England’s one percentage point cut in interest rates. It was below $1.45 against the dollar at one stage but recovered after the announcement of the cut, which was less that many investors had expected.

There are still those that fret about a “sterling crisis”. But the fall in the pound should be seen as part of the solution not part of the problem. This certainly appears to be the Bank of England’s view.

In any case, while sterling could go lower yet, sentiment could well swing back next year. The dollar has benefited from US investors repatriating funds, a process that may not have much further to go. And if the ECB continues to act so timidly, the markets may conclude that economic recovery in the eurozone may be slower than in Britain.

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