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Salmond put under pressure by Carney warning

ALEX Salmond is facing mounting pressure to set out alternative currency plans for an independent Scotland after the Governor of the Bank of England issued a warning about the First Minister's proposal for monetary union with the rest of the UK.

MESSAGE: Bank of England Governor Mark Carney delivered a speech in Edinburgh outlining potential risks and benefits of a currency union for Scotland and the UK.
MESSAGE: Bank of England Governor Mark Carney delivered a speech in Edinburgh outlining potential risks and benefits of a currency union for Scotland and the UK.

In his first major intervention in the referendum debate, Mark Carney said an independent Scotland would have to sacrifice control over tax, spending and borrowing if it wanted a formal deal to share the pound with the rest of the UK.

His assessment was immediately dismissed by Finance Secretary John Secretary, who insisted an independent Scotland would have control of key policies as part of a currency union.

However, the UK Government and cross-party pro-UK Better Together campaign said the Governor's comments destroyed Mr Salmond's claim that an independent Scotland could both share the pound and pursue radically different economic and welfare policies.

They repeated their warning that a currency union was unlikely to be accepted by the UK and urged Mr Salmond to put forward a "Plan B".

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Delivering his verdict in a highly technical speech to business leaders and economists in Edinburgh, Mr Carney said: "A durable, successful currency union requires some ceding of national sovereignty."

He said a currency union between an independent Scotland and the rest of the UK would require shared institutions and strict rules.

He warned that "tight fiscal rules" he would be required to minimise the "moral hazard" of one member pursuing irresponsible economic policies and needing to be bailed out by others via a shared central bank.

Mr Carney said recent crises in the eurozone showed member countries needed new ways to share fiscal sovereignty, possibly including common unemployment benefits. He said: "The euro area has shown the danger of not having such arrangements, as well as the difficulties of the necessary pooling of sovereignty to build them.

"An independent Scotland would need to consider carefully how to develop arrangements with the continuing United Kingdom that are both consistent with its sovereignty and sufficient to maintain financial stability."

He also said the existing UK-wide currency union was "durable and efficient" and had helped sustain Scotland's large banking sector.

He warned that the creation of an international border could damage trade between Scotland and England.

Mr Carney, who previously ran Canada's central bank, stressed he was not commenting on the possible advantages or disadvantages of Scottish independence.

However, his views on the basic requirements for a currency union are seen as vital to the debate, as he would be responsible for implementing such an arrangement, if one could be agreed.

Prime Minister David Cameron last night joined calls for the SNP to come up with a currency "Plan B" after the Treasury said Mr Carney's speech highlighted a series of difficulties with monetary union.

A Treasury spokesman said: "A currency union is highly unlikely to be agreed. The Scottish Government needs a Plan B."

Alistair Darling, the former chancellor who is heading the Better Together campaign, said: "As the Governor makes clear, in a currency union both sides have to agree to each other's taxes, spending and borrowing.

"It is highly unlikely that the people living in the rest of the UK would agree to this.

"The Governor's speech quietly demolishes Alex Salmond's claim that Scotland could keep the UK pound after leaving the UK.

"The Nationalists cannot continue to make false promises on currency when it is so obvious that leaving the UK means losing the UK pound."

Mr Carney spoke following a private meeting with the First Minister at which he confirmed the Bank Of England would continue to provide the Scottish Government with technical help.

Mr Swinney said: "As he made clear, he was not making the case for or against Scotland's independence, which is for the people of Scotland to decide, or for or against a currency union, which will be a matter for agreement between the Scottish and UK Governments.

"A shared currency will mean an independent Scotland having control of tax policy, employment policy, social security policy, oil and gas revenues, immigration policy and a range of other levers to suit our own circumstances, helping to grow our economy, create jobs and secure a more prosperous and fairer society."

Patrick Harvie, leader of the Scottish Green Party and a key member of the Yes Scotland campaign, repeated his call for an independent Scotland to have its own currency.

He said: "I recognise that the SNP's preference is for continued use of sterling but given the likelihood of the Scottish and UK economies diverging we should stand ready to exert full economic independence using our own currency."

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