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Scotland’s currency dilemma

Stephen Beard Sep 15, 2014
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Scotland’s currency dilemma

Stephen Beard Sep 15, 2014
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“No, it just doesn’t make sense!”

Ken Symon – a leading light in the campaign against Scottish independence – sounds incredulous as he discusses the separatists’ currency plan. He’s baffled that they want to break away from the United Kingdom, but carry on using the British pound.

“Does that amount to independence?” Symon asks over a mug of tea in Glasgow at the “No” campaign‘s headquarters. “They would keep the Bank of England with the Governor of the Bank appointed by the UK government. It just doesn’t make sense.”

“Yes, it does make perfect sense!” says Mike Danson at the “Yes” campaign headquarters a few blocks away. Danson an economics professor and pro-independence activist – insists it would be sensible to retain the pound after independence. “It would benefit both Scotland and the rest of the UK,” he says. “ After all, we have a cross border trading relationship worth $180 billion a year. It wouldn’t make sense for either of us to have all the transaction costs of using a different currency.”

But there is a problem with the Yes campaign’s currency plan: The rest of the UK has given a resounding response to the proposal : “No!”

The leaders of the UK’s three main political parties and a majority of the people of England,Wales and Northern Ireland, according to opinion polls, have rejected the plan. And they have been supported by some eminent international economists.

“Look at what’s already happened in Europe,” argues Nobel Prize winner and Princeton professor, Paul Krugman . “We have an unprecedented experiment in sharing a currency without being part of the same country. And it’s a disaster. The euro area is doing worse this time around than it did in the 1930s.”

Scotland’s independence campaigners are unfazed by this analysis, or by the opposition of the UK’s main political parties.

“It’s not for them to say we can or cannot have the pound,” says Mike Danson. “It’s a shared asset. It’s as much Scotland’s pound as it is England’s or Wales’.”

Even if Scotland has left the UK?

“Yes,” he insists. “It’s a shared asset that’s up for negotiation.”

Danson says Scotland’s got the whip hand. If the rest of the UK refuses to share the pound, then the newly independent country may walk away from its share of the UK’s $2 trillion national debt.

The currency question remains critical. Unless it is resolved a vote for independence on Thursday could bring turmoil to Scotland… and the rest of the UK.

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