Simon Calder: Surviving the summer squeeze in Europe

Life in 21st-century Britain has echoes of the hyper-inflation that brought down the Weimar Republic. On Monday, I set out to procure the euros I need for the summer. At Thomas Exchange in the Strand in central London, the rate on the board was €1.14 to a pound. I went to the bank next door, and drew out a wad of £20 notes. When I walked back to the bureau de change, clutching my holiday funds for the summer, a man was changing the last digit from "4" to "3". Crikey: in the time it took to procure some cash, sterling had lost nearly 1 per cent of its value. At that rate, I calculated, the pound in my pocket would be almost worthless by elevenses.

This is the weekend when our collective desire to be elsewhere is most comprehensively indulged: Abta reckons 1.8 million British holidaymakers will flee the country between yesterday and tomorrow, on trains, boats and planes. For many travellers it will be their first big trip since the pound plummeted precipitously against the euro and dollar.

Cause and effects of sterling's slide were revealed this week by the Travel Trends survey from the Office of National Statistics. The "tourism deficit" has, for the first time, ballooned beyond the £20bn mark: our spending abroad, less what foreign visitors spend here, works out at a pound per day for the entire British population. As avid international travellers, we create demand for euros that inevitably strengthens the single currency and saps sterling's health. But "stay at home and save the pound" isn't the most appealing political slogan.

France now supplies more overseas visitors to the UK than any other nation, having wrested the title without a struggle from the US. Ireland nipped into second place. The reason is clear: if your country is next door to an ailing nation, it makes sense to go and live like un roi for a while, even if your nose displays an upward tendency when contemplating the cuisine, weather and fashion sense of the British. Even so, while the French brought in £1bn last year, we spent four times as much on visiting France. (And it isn't even our favourite country: that award goes, yet again, to Spain.)

Fewer Brits ventured abroad last year, but our total spending increased by nearly 6 per cent. This was not profligacy on our part; indeed, it shows that we are becoming a nation of shop-avoiders. A traveller seeking to live in the style to which they had become all too accustomed during the olden, golden days of 2007, would need to spend around 20 per cent more sterling to maintain purchasing power.

So, how to avoid travel-induced penury? Whether you are heading for the Vendée, Valencia or Weimar, the leading accessory for Brits this year will be a Swiss Army knife. This crafty device makes you an instant picnicker, with knife, corkscrew and a curious spiky thing for removing stones from the hooves of passing chevaux. Sadly, the knife is unlikely to survive first contact with airport security staff unless packed in a checked-in bag – which you may not have, in order to avoid extra charges.

Instead, focus on the commodity that travellers squander sterling on above all others: foreign currency.

After my Weimar moment, I pedalled off to peddle my pounds elsewhere. The Eurochange bureau on the edge of Leicester Square showed a rate of €1.13. Could you improve on it? "Sure, I'll give you €1.14."

Big deal, you might be thinking: on a £500 transaction, that amounts only to five extra euros – the price of a couple of beers in Last Orders. (This is an "English pub" in the pretty town of Neubrandenburg, north of Weimar; even the threat of "English beer and snacks" does not deter customers.) But if you fail to seek out the best rate, you could pay handsomely. Anyone changing money at an airport or on board a ferry may as well hold out their wallet and invite the cashier to help themselves.

I called the International Currency Exchange bureau at Manchester airport on Thursday. How much, I wondered, would it cost me to buy €100? The answer was as deadpan as it was outrageous: "£104.81". That represents a rate of 95 euro cents to a pound. You have been warned.

How does a man who made a fortune helping people save money conserve his own cash when abroad? Simon Nixon, creator of MoneySupermarket.com, says it's a simple matter of taking the right plastic: "I take out money from ATMs with the Nationwide debit card because it's got some of the lowest charges in the market place. But if I'm buying something abroad I use my Nationwide credit card because it bestows protection."

Personally, I'll stick to cash. You know the exchange rate, and taking euros or dollars eliminates the risk of credit-card fraud; cash says less about you than cards ever can.

No mates for cheques?

Carrying cash can attract the wrong kind of attention, which is why the traveller's cheque has proved such an enduring option for taking money abroad: in return for paying a commission of typically 1 per cent, you have the reassurance that you can obtain a refund if they are lost or stolen (though two years on from losing some Amex cheques, I am still waiting for replacements). But using them seems to be getting tougher. Phil Booth reports "I'm currently driving round the Continent and I took, as I always do, my euros as Amex travellers' cheques. However, when visiting Holland and Belgium no bank was prepared to change them."

Travellers' cheques have always been useful in the US, because you can spend them like cash in shops and restaurants. Or can you? Irene Kemp recently visited her daughter in Virginia, taking US dollar travellers' cheques as usual. But for the first time she was not able to use them for everyday purchases, nor even exchange them for cash in banks – apparently because of worries about forgeries.