The United Kingdom has been hit hard by the financial crisis, as economic growth had been highly dependent on consumer borrowing and the City of London’s status as Europe’s top finanical center. British output contracted at an annulaized rate of 7.4% last quarter and is projected to fall 4% overall in 2008. Worse, the nation which built a world empire on the back of  its sterling credit rating, now has a a fiscal deficit of 13.8% of GDP – the worst in the world.

Yet the worst may be over for the British economy. The pound has stopped its slide – stabalizing at around .85 to the Euro –  and this week’s unemployment numbers were far better than expected. The benchmark FTSE 100 is flat on the year, but the iShares MSCI United Kingdom Index (EWU)  is up nearly 10% on the back of a stronger pound.