Would an independent Scotland lose its currency union with the pound sterling and stay locked out of the European Union?
The UK’s Chancellor of the Exchequer doubts a currency union would occur, while the President of the European Union, José Manuel Barroso, sees an independent Scotland being vetoed by Spain, which is dealing with secession demands from Basque and Catalan separatists.
All it needs is for one EU Member State to veto a country’s application for entry to keep that country out.
Mr Barroso compared Scotland’s application to that of Kosovo, which was once art of Yugoslavia. Kosovo’s application to join the EU was opposed by Slovakia, Romania, Greece, Cyprus and Spain.
In an interview during the Andrew Marr Show, a BBC1 TV program, Barroso said:
“Of course it will be extremely difficult to get the approval of all the other member states. We have seen Spain has been opposing even the recognition of Kosovo, for instance.”
“So it is to some extent a similar case … and so I believe it’s going to be extremely difficult, if not impossible – a new member state coming out of one of our countries – getting the agreement of the others.”
Scotland’s Finance Minister, John Swinney, said:
<p>“He’s (Barroso’s) set out his position linking and comparing Scotland to the situation in Kosovo. Scotland has been a member of the EU for 40 years – we’re already part of the European Union.”
“The Spanish Foreign Minister said if there is an agreed process within the United Kingdom by which Scotland becomes an independent country then Spain has nothing to say about the whole issue.”
“That indicates to me quite clearly that the Spanish government will have no stance to take on the question of Scottish membership of the European Union.”
Scottish Nationalists angry at Barroso’s claims
Scottish Nationalists reacted with fury to Barroso’s comments, describing his claims as “preposterous and nonsense.”
Nicola Sturgeon, Scotland’s Deputy First Minister, said there is absolutely no evidence that Spain or any other EU Member State would block an independent Scotland.
George Osborne, the UK’s Chancellor of the Exchequer, said in a speech in Edinburgh that a currency union with the British pound “would not be in the interests of either the people of Scotland or the remaining UK.”
The UK Treasury has also said that in the event of an independent Scotland, it would not recommend a currency union to the Government of the continuing UK.
“I hope passionately that the people of Scotland choose to stay within our family of nations in the United Kingdom. I want Scotland to keep the pound and the economic security that it brings. But it is clear to me I could not as Chancellor recommend that we could share the pound with an independent Scotland.”
“The evidence shows it wouldn’t work. It would cost jobs and cost money and wouldn’t provide economic security for Scotland or for the rest of the UK. I don’t think any other Chancellor of the Exchequer would come to a different view.”
“The Scottish government says that if Scotland becomes independent there will be a currency union and Scotland will share the pound. People need to know – that is not going to happen.”
Treasury advises against an independent Scotland currency union
The Treasury has published an analysis of what would occur if there were currency union. It states that “while the United Kingdom is one of the most successful monetary, fiscal and political unions in history, the fiscal and financial risks of entering into a currency union with a separate Scottish state would be too great.”
The Treasury says the UK system works well because its spending, taxation, monetary policy and financial stability policy are coordinated across the whole country.
The Scottish economy, if the country became independent, would be more vulnerable and more susceptible to the effects of shocks in the energy and financial sectors.
If an independent Scotland were under the British pound sterling umbrella, the remaining UK would be exposed to much larger risks.
There would be a greater likelihood that UK taxpayers would be asked to support an independent Scotland in the event of a financial or fiscal shock.
In a press release, the Treasury wrote:
“If people in Scotland vote for independence, the Treasury would advise the continuing UK Government against entering into a currency union with an independent Scotland.