Independent Scotland? – Not without its own currency!

Bank of England’s governor Mark Carney dashed hopes for an independent Scotland that uses the British Pound

A couple of weeks after the Scottish independence currency question has resurfaced, our thesis that a currency union with the UK would undermine its ultimate goal of sovereignty has been confirmed by none other but the current governor of the Bank of England Mark Carney. He has expressed his opinion at an event hosted by the Scottish Council for Development and Industry. Despite not admitting it as such, this is a big defeat for Scottish National Party leader Alex Salmond.

alex salmondAs of right now, the case for Scottish independence has been steadily losing support amongst voters since apparently there are way too many unknowns (one of which is the future Scottish currency). Mr Carney has stated that an agreement about a currency union would be in the hands of the Scottish and UK parliaments in case Scotland decides to part from the UK, however the UK Treasury has been reluctant to affirm that such an agreement is possible.

Quite the opposite – it has been deemed as “unlikely” and the latest talk by Carney is not going to help shift that stance. In an obvious reference to the serious currency union problems that Europe is still battling, he stated in his speech that economics of currency unions would require some political sacrifices, such as “some ceding of national sovereignty”. If the goal of Scotland is to remain fully independent, then it makes no sense whatsoever to keep the British Pound as currency.

The fragmentation of economic performance and the accompanying imbalances and inequalities could reach dire straits if not addressed by some common fiscal and regulatory policies. Meanwhile British pound volatility could still spike up and drive volumes to UK spreadbetting companies. The polls so far are not looking good for Scottish independence prospects, however all it could take is a major political flop of some sort.

Stay tuned to LeapRate for more news on the subject as the referendum date in September draws closer.

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