Currency Union might not let an independent Scotland join the EU as the “Yes” front now leads

José Manuel Barroso, President of the EC, and Alex Salmond, First Minister of the Scottish Government (EC Audivisual Services, 2/12/2009)

José Manuel Barroso, President of the EC, and Alex Salmond, First Minister of the Scottish Government (EC Audiovisual Services, 2/12/2009)

It is almost a week away now. Scotland’s independence referendum is next week, and the situation has never been as delicate and confused as it is now. The news came in last Sunday, and it was a shock: Scottish PM Alex Salmond’s “Yes” campaign is in the lead for the first time. A YouGov poll by The Sunday Times placed the “Yes” to independence campaign at 51 per cent against the “No” campaign with 49 per cent, overturning a 22-point lead for the “Better Together” unionist campaign in just a month.

The two-point advantage is clearly within the margin of error and probably shows a situation which is closer to a draw than to a triumph for one of the two parts, but the news run faster than light. And its echo is still audible. As the Queen is said to be “horrified” at the prospect of a “yes” vote, Chancellor George Osborne promised a “plan of action to give more powers to Scotland” should a “No” vote prevail in the referendum and Prime Minister David Cameron has announced that the Saltire will fly above Downing Street in a show of support for the Union.

But these were not the only reactions to the news. The pound slumped to a 10-month low on Monday as the “Yes” campaign took the lead, losing almost one and a half cents against the US dollar. Sterling reached $1.618, the lowest level since November 2013, and it was not alone while falling. Energy group SSE (Scottish & Southern Electricity), Lloyds Banking Group, Standard Life and Aberdeen Asset Management all fell 1.5% to 2.5% in early trading on Monday, with Royal Bank of Scotland as the biggest ‘faller’ in the FTSE 100 (3% down).

The situation is uncertain for sure, but uncertainty may all come from the same source: the currency that an independent Scotland would use. This is still a big knot and always the biggest question. As largely rumoured, an independent Scotland could not rejoin the European Union if it used the pound informally, as held out by the “Yes” side. This practice is generally known as “sterlingisation”.

Former EU Economics Chief Olli Rehn is one of the most prestigious voices to have confirmed that this theory cannot be taken into consideration. Indeed he declared that it would “simply not be possible” to combine a policy of sterlingisation with EU membership. Mr. Rehn, was quite direct though. In a letter to the British chief secretary to the treasury, Danny Alexander, he said that states applying for membership have to have a central bank. Mr. Rehn officially casted Alex Salmond’s plans of currency union with London, also without an agreement, as he said, into doubt. Therefore the absence of a central bank and not having a formal currency union could prevent an independent Scotland from joining the EU.

So we have the “Yes” front gaining ground on one side, and still no answer to the “what currency is an independent Scotland going to adopt?” question on the other. Not a common view of the thing at least. Mr. Salmond would say there’s no doubt about this, and that an independent Scotland would automatically adopt sterling as its currency.

But I ask: is the currency union option an actual and convenient one for Scotland indeed? And, most of all, is this an option that truly marries the idea of independence from the UK? Basically currency union is when countries with different political systems share a currency. This way there’s always a certain loss of economic – and, someway, political power for the country that adopts the currency in a “second moment”. High interest rates or general limits might be imposed by London, and this would be again some kind of dependency. A much more subtle and silent one, but still dependency. And this is something that should be taken into consideration by the Scots.

The other options seem to be quite hard work anyway. Adopting a new currency would bring total control and general independence from the Bank of England, but also some kind of “start from point zero” for Scotland, with markets to convince and investments potentially falling. The option of Scotland adopting the Euro seems now to be quite unrealistic, as the pro “Yes” campaigners are investing totally on a currency union option, making the Eurozone currency not so popular.

Scotland is running towards a historic moment, which might change its history forever, and the last few days apparently changed the scenario itself like never before. What sounded crazy just a few weeks ago is now shaking the markets, and maybe also the Parliament’s seats. The only risk is that there’s still too much uncertainty, as I said, and that this revolution could take place with unexpected consequences.

Too many question marks and slogans should be replaced by answers, while the referendum is less one week away. On 18 September Scotland votes on whether it is better to end its 307-year union with England and break up the UK. This is something that now has got a completely different sound and outreach.

Follow @carlomotta_ on Twitter

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

An economist explains how to create a fairer society

Western Balkans: European Parliament takes stock of 2018 progress

A Sting Exclusive: “Regulators and the shipping industry collaborating for a sustainable future”, written by the Secretary General of IMO

This is where obesity places the biggest burden on healthcare

WEF Davos 2016 LIVE: “Chinese economy has great potential, resilience and ample space for policy adjustment”, China’s Vice President Li Yuanchao reassures from Davos

Landmark terror finance resolution adopted by Security Council

Businesses, governments and consumers to implement a more climate-friendly approach to #BeatPlasticPollution on World Environment Day 2018

‘We are nowhere closer’ to Israeli-Palestinian peace deal, than a year ago, Security Council hears

Vote at 16 in Malta: next stop Europe

Parliament criticises Council’s rejection of money laundering blacklist

Why growth is now a one way road for Eurozone

Why financial services can kickstart Africa’s digital economy

The Fourth Industrial Revolution must not leave farming behind

Will the EU reconsider Frontex’s role in light of accusations about violations of migrants’ human rights?

Will Eurozone be able to repay its debts? Is a bubble forming there?

To feed 10 billion people, we must preserve biodiversity. Here’s how

World is ‘on notice’ as major UN report shows one million species face extinction

Trump and Brexit: After the social whys the political whereto

A new European banking space is born this year

Europe might not avoid new partitioning on Ukrainian crisis

Youth policy in Europe not delivering for young people

Guatemala: UN anti-corruption body will continue working, as Constitutional Court blocks Government expulsion

Global hunger is on the rise. These simple steps could help eradicate it

UN General Assembly urges greater protection for Palestinians, deplores Israel’s ‘excessive’ use of force

Terrorist content online: MEPs agree to start negotiations with EU countries

Mobile World Congress 2015 first to debate EU’s new stance on Net Neutrality and Roaming Charges

Largest joint UN humanitarian convoy of the war, reaches remote Syrian settlement

GSMA outlines new developments for Mobile World Congress Shanghai 2018

“Is Europe innovative? Oh, Yes we are very innovative!”, Director General of the European Commission Mr Robert-Jan Smits on another Sting Exclusive

We won’t win the online security war without people power

Alarming level of reprisals against activists, human rights defenders, and victims – new UN report

Myanmar: Conflict resolution at ‘total standstill’, military commanders must answer for crimes against humanity

Under fire, UN refugee agency evacuates 135 detained in Libya to Niger

External action: more funds for human rights, development and peace

Ten UN peacekeepers killed in a terrorist attack in northern Mali

This is how Britain saved some of its most precious wildlife from the threat of extinction

Mergers: Commission fines Canon €28 million for partially implementing its acquisition of Toshiba Medical Systems Corporation before notification and merger control approval

Economic sentiment and business climate stagnate in miserable euro area

Intel @ MWC14: Our Love Story with Mobile – Transforming Wireless Networks

“ASEM: Global Partners for Global Challenges”, a Sting Exclusive by China’s Ambassador to the EU

Mario Draghi quizzed for last time by Economic and Monetary Affairs Committee

A machine din

The strong version of the EU banking union gains momentum

June infringements package: key decisions

These 4 Nordic countries hold the secret to gender equality

Trump denies climate change existence while Paris Agreement is not fully supported by G20 ahead of COP24

Iceland to take vacated US seat on Human Rights Council

Merkel, Mercedes and Volkswagen to abolish European democracy

Three ways the world must tackle mental health

A dangerously hot climate, simmering political tensions: ‘This is not the summer of our youth,’ UN chief warns

Brexit: when the hubris of one man can set the UK, the EU and the entire world on fire

MEPs vote for upgrade to rail passenger rights

Italy should boost investment in training for the future of work

Commission launches new tool to support digital teaching and learning in schools

Tackling ‘deeply worrying’ global rise in anti-Semitism is a job for all societies everywhere, says UN chief

‘Make healthy choices’ urges UN agency, to prevent and manage chronic diabetes

This is what CEOs around the world see as the biggest risks to business

Don’t let smoking steal life’s breathtaking moments, urges UN health agency

Migration crisis update: lack of solidarity not only among EU leaders but also EU officials

Three ways batteries could power change in the world

More Stings?

Comments

  1. I was excited to uncover this website. I need to to thank you for
    your time just for this wonderful read!! I definitely savored every little bit of it
    and I have you book marked to check out new things in your
    web site.

  2. Quality content is the secret to invite the users to pay a quick visit
    the site, that’s what this web site is providing.

  3. It’s actually a nice and helpful piece of information. I am happy
    that you simply shared this useful information with us. Please
    keep us informed like this. Thank you for sharing.

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s