The pound could drop below the euro in the next few months, a report by the Center for Economics and Business Research (cebr) shows. The report said the plunge in the value of the pound was linked to skepticism over the British government’s plans to correct the £178 billion budget deficit.

In the report, cebr Chief Executive Douglas McWilliams said the UK economy was walking “five yards away from the edge of the cliff,” and could be brought down by an “unexpected gust.”

After hitting a record low of 1.02 a year ago, the pound is now trading at 1.10, but its situation is not any less precarious.

McWilliams points to weak political policies regarding the public deficit as the primary threat to the pound. Expectations of a victory for the Conservatives in the upcoming election is raising hopes of resolute action to tackle the deficit, but if Labor begins to close the gap before the election, cebr says the sterling would suffer.

The report follows a letter from several leading economists to the Sunday Times on December 27. In the letter, they accuse the government of “irresponsible” failure to formulate a convincing plan to reduce the UK’s budget deficit, and point out the “heightened risk” of Britain’s debt rating getting downgraded.

“Rating agencies are looking for an excuse to downgrade the UK government from its aaa-rating, following countries such as Greece,” McWilliams said. “Whether markets react to Britain’s fragile public finances before they react to the divergence of performance in the eurozone will determine whether sterling drops below parity. If I had to bet, I would bet on the side of parity being broken.”

The roots of Britain’s failing pound are the same as the roots of America’s economic crisis. Analysts commonly point to their enormous national trade deficits combined with historically high levels of consumer debt, which have undermined the foundations of both nations’ economies. More fundamentally, Britain and America’s economic breakdown is a result of moral breakdown (greed, fraud, selfishness, etc.).

Herbert W. Armstrong forecast that a coming crisis in the Western world’s monetary systems—the pound, dollar and shekel—would help bring about the collapse of the American and British peoples. The early stages of that financial crisis are well underway. For more information, read “Speeding to Economic Armageddon.”