AN independent Scotland would have to negotiate with Brussels on the euro, border controls and keeping a share of Britain's cash rebate, the Scottish Government has acknowledged for the first time.
In a significant shift, ministers accepted the prospect of talks on European Union membership extending to key issues such as the single currency and Schengen free travel area.
Deputy First Minister Nicola Sturgeon insisted an independent Scotland would continue as an EU member on "terms that are reasonable".
But – after previously arguing that an independent Scotland would automatically inherit the UK's terms of membership – she told MSPs her case was based on "common sense and realism".
The Deputy First Minister made a statement to parliament after European Commission President Jose Manuel Barroso said a newly independent state would have to apply for EU membership.
His comments embarrassed the Scottish Government, which has consistently claimed EU membership would be automatic and talks would only be required on issues such as the number of Scots MEPs to be sent to the European Parliament.
Yesterday, Ms Sturgeon opened the prospect of talks on the single currency, the Schengen free travel area – which ended border control across much of Europe but not the UK and Ireland – and keeping a share of Britain's EU budget rebate, worth £290 million to Scotland.
Insisting Scotland would negotiate reasonable terms, she added: "By that I mean that just like Sweden we would not join the euro until and unless it was in Scotland's interests to do so and we had satisfied the conditions for doing so.
"And just like Ireland we would not enter Schengen but would instead look to co-operate with the rest of the UK in the Common Travel Area. Both of these positions are practical and justifiable and would, I am sure, be supported by all parties here in Scotland. The evidence suggests they would be understood by our European partners."
Questioned by Labour's finance spokesman, Ken Macintosh, on Britain's cash rebate, she said: "I would be confident of an independent Scottish Government negotiating a good deal for Scotland."
She said an independent Scotland would work together with the rest of the UK during talks on the issue.
In contrast to previous definitive statements about an independent Scotland's membership of the EU, Ms Sturgeon said she was basing her claims on "arguments of common sense, reality and mutual self-interest".
Citing German unification, she insisted the EU was "flexible" enough to smooth Scotland's membership – especially as talks would take place after a Yes vote but while Scotland remained in the UK, and, as a result, within the EU. She said it was "overwhelmingly in the EU's interests" to ensure Scotland remained a member.
Ms Sturgeon has requested face-to-face talks with Mr Barroso. He is considering the request but Brussels is wary of becoming drawn more deeply into the political fight over Scottish independence.
Labour's constitutional spokeswoman, Patricia Ferguson, said: "This looks like a humiliating capitulation but so much of the statement was confused."
Scots Tory leader Ruth Davidson said the SNP had put at risk the £150-per-household benefit the UK rebate brings to Scots.
l Former Prime Minister Gordon Brown has defended Scotland's place in the UK as key to maintaining social justice.
Scottish values helped to form the Union, he said, and led to the creation of equal social, economic and political rights for all citizens.