• Text size      
  • Send this article to a friend
  • Print this article

Rating agency warns of currency union dangers for independent Scotland

Keeping sterling as the currency in an independent Scotland could be a "source of uncertainty", a leading ratings agency has said.

A monetary union without a fiscal and banking union would be "unstable", according to a Fitch Ratings report.

A Yes vote in next year's referendum would leave Scotland and the residual UK - England, Wales and Northern Ireland - with identical public debt ratios if divided by GDP, the report said, meaning the impact of independence "would likely be neutral" for the sovereign credit profile of the residual UK.

It also said the residual UK would be left with only 9% of oil and gas production reserves if the North Sea was divided geographically.

The report said: "The monetary arrangement following Scottish independence could become a source of uncertainty even if Scotland remained in the sterling currency zone.

"As the intensification of the eurozone crisis showed in 2012, a monetary union without fiscal and banking union is unstable and the prospect of an exit from a monetary union could lead to high volatility and market turbulence, potentially detrimental to all members."

Better Together chair Alistair Darling said the report was "another blow" to the SNP's currency plans.

He added: "It is increasingly obvious that the idea of a currency union is dead in the water. To be successful, a currency union requires fiscal and political union - the very thing the SNP are campaigning to dismantle in the United Kingdom.

"This will only increase the pressure on Alex Salmond to tell us what currency we would use if the rest of the UK refuse a currency union. What is the plan B?"

A spokesman for Finance Secretary John Swinney said: "Comparisons with the eurozone are wrong because the Scottish and rest of the UK economies are well-matched with almost identical levels of productivity, unlike the disparate economies of the euro area.

"A shared currency within a common sterling area has been backed by the expert work of the Fiscal Commission, including its two Nobel laureates, by many leading business figures and academics, and by currency experts at Deutsche Bank and Citigroup.

"Sharing the pound will also be in the overwhelming interests of the rest of the UK, and has been described by No campaign leader Alistair Darling as 'logical' and 'desirable'."

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

200877