Chancellor George Osborne and the EU Commission president, José Manuel Barroso, have “launched separate salvos” in the past week, warning Scottish voters they could not keep their currency or their EU membership if they vote to leave the UK in September’s referendum, says Kiran Stacey in the Financial Times.
Alex Salmond, the leader of the Scottish nationalists, insists they are bluffing. He says that the transaction costs of a new currency would be too high for businesses on both sides of the border and threatened to refuse Scotland’s share of the national debt if it could not share the pound.
Treasury officials stood their ground, arguing that “the risks of a currency union are higher than the costs of a new currency, and that refusing to share British debt would lead to a catastrophic collapse in trust for the Scottish government in the bond markets”.
Sterling has always been the thorniest issue for the separatist movement. But Osborne’s pledge to veto a currency union may well boost support for a Yes vote in the short term, as he is likely to have raised hackles in Scotland.
I fear the Chancellor’s threats could “easily backfire”, says Jeremy Warner in The Daily Telegraph. There are no “viable alternatives other than monetary union” for an independent Scotland. “To deny the Scots the pound is therefore to deny them independence.”
Joining the euro would be problematic, because most of its trade is with the rest of the UK, and ‘sterlingisation’ (Scotland using the pound with no say over monetary policy) is unrealistic for a country with such a large financial and banking sector.
Salmond is doing himself no favours, says Allister Heath in The Daily Telegraph. “With self-government comes the need to earn economic credibility”, yet he is threatening a “confidence shattering” default on Scotland’s share of the national debt, is “clueless” about which currency to adopt, “has no idea how to retain a financial sector in Edinburgh, doesn’t have a realistic plan to deal with Scotland’s declining oil revenues, hasn’t thought through his future trading arrangements and continues to support a nonsensical something-for-nothing approach to the public finances. It’s a recipe for disaster and the very opposite of the cautious, prudent, pro-market manifesto that would be needed to make independence succeed.”