Rift Widens over Scottish Independence

By Simon Morris On Friday, February 14 th, 2014 · no Comments · In

The row over Scottish Independence has come to center on its economic future this month as the idea of the pound as a shared currency and the proportion of UK debt an independent Scotland would assume have become key issues.

Speculation over whether Scotland would be able to share the pound with the rest of the UK has been rife within the finance industry since the question of Scottish independence was first forwarded to a referendum.

Those in favour of a shared currency argue amongst other things a shared currency would foster trade between the UK and an independent Scotland. However detractors of Scottish independent point to the Eurozone crisis and the Euro currencies role in it to suggest that a shared currency could bring economic calamity.

Now Chancellor George Osborne has indicated that UK government policy will oppose a shared currency with an independent Scotland. Mr. Osborne gave a speech on the subject on Thursday and he made it quite clear what the UK government’s position would be.

In the speech he said that “the pound is one of the oldest and most successful currencies in the world. I want Scotland to keep the pound and the economic security that it brings.”  However he went on to argue that that economic stability only comes from the union and that it can only be maintained if Scotland stays in the union.

Furthermore the Financial Times spoke to leader of the anti-independence campaign ‘Better Together’ on the issue. He told the financial publication before the speech had been given that Mr. Osborne would be “totally emphatic” in his rejection of a currency union with an independent Scotland.

Members of the campaign also said that the Treasury is planning to release a paper to accompany the Chancellor’s speech, which will anaylse the constraints in national sovereignty a currency union would enforce, including most notably the agreement of a banking union and fiscal transfers.

Nicola Sturgeon, Scotland’s deputy first minister denounced the strategy the day before the Chancellors speech and suggested that an independent Scotland may react by refusing to take on a share of the UK national debt.

On the issue of the rejection of a currency union, Sturgeon said that it “would cost their own businesses hundreds of millions of pounds, it would blow a massive hole in their balance of payments and it would leave them having to pick up the entirety of UK debt.”

It is clear that If Scotland votes for independence one way or another it could have an effect on the economy of both states. However what that effect may be is clearly open to debate.

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