Scottish Independence: What Shackled to the £?

As this blog has said repeatedly, you cannot have a currency without a government. The Eurozone thought you could. There are in history few more spectacular examples of wrong thinking. Retaining sovereignty while giving it up to fiscal governance by some federal structure is on one level impossible and on another inefficient. All of this is clear in Euroland.

What is also clear is that if a government is not de-facto in existence in a currency union, one emerges, usually the strongest and richest power. Germany now controls budgetary policy and interest rates in all of the Eurozone. Various committees and councils, as well as the European Central Bank, have their say but it is Merkel and the Bundesbank who decide. Greece, Spain,Portugal, Italy and Ireland know  what this means. Greece feels itself raped and has lost its self respect. All are suffering in order to meet German standards. Ireland has done best but Italy has stagnated as the Euro is over valued in relation to the lire and undervalued in relation to the deutschmark.

It is on the currency question on which the case made for independence by the Scottish Nationalists is seriously flawed. Even if England agreed to share the pound, and they may not, England would determine all aspects of economic policy. This would be no kind of independence worth having. Moreover Scotland as a country has always been orientated to the political left. The Scot Nats are left wing, Labour is the predominant alternative for Edinburgh and the overwhelming choice for Westminster in Scotland.The Tories are nowhere north of the border.

But if Scotland broke away and fifty Labour seats in Scotland no longer counted in the House of Commons, the prospect of England electing a right leaning Conservative majority government, perhaps propped up by UKIP, would be much more likely. Thus Scotland could find itself financially in thrall to the policies of a small government, low tax, cuts wielding right wing administration in London. What kind of independence would that be? Ask the Greeks. And suppose England leaves the EU? What then?

If Alex Salmond is serious about Scottish independence he must forget about some new Sterling Area and have the courage to set up a Scottish central bank to back a Scottish pound. Otherwise he is offering a pig in a poke. That is not worth voting for.

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