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At 08:49 GMT, the euro was down 0.6 per cent against the pound, taking it to 88.21p, Reuters reports.
Earlier in the day, it had touched 88.11p, a low not seen since the middle of September 2009.
Rumours that the German chancellor Angela Merkel might resign - suggestions that have since been denied - also hit the European currency, which was down 0.6 per cent against the dollar, taking it to $1.4404.
Currency strategist at Calyon Stuart Bennett explained that the euro is likely to remain low in the near future.
"Fiscal woes may continue to limit, if not prevent, some upside movement in the euro in the weeks ahead," he was quoted as saying.
Sterling also gained earlier this week, after the UK's trade deficit narrowed by more than expected.
Posted by Clive Arneil
