Scotland May Not Keep Sterling

Scotland May Not Keep Sterling.

After a report in the FT, news has been circulating around the web that Scottish Secretary Alistair Carmichael has warned Members of the Scottish Parliament that Scotland would have to dump sterling if it went independent.

We already know that Scotland has set its stall to retain sterling as its national currency if it did secure independence, but Mr Carmichael, alongside other MP’s have suggested that if Scotland does move for independence, then the remaining parties of the United Kingdom would be better served with the pound not exposed to or hampered by the Scottish Economy.

Comment

This we believe, is all political positioning.  Many economic commentators believe it is not feasible for Scotland to establish its own currency given the risks of speculators playing havoc with a Scottish Pound Currency, but likewise are the Scots ready for the Euro, we think not.

Spin or not, the war of words and debate over Scottish Independence will continue for the coming months until the referendum in September 2014 and we it is far from conclusive what the result will be.  

A new currency or the Euro is going to present huge integration problems for Scotland although it will take a number of years to plan and implement the changeover not just governance but currency.  Given that some of the UK’s largest bankers and insurers (Royal Bank of Scotland, Prudential, Standard Life etc.) are Scottish in additional to benefits, state pensions and other welfare provision – the move away from the Union is going to mean huge economic turmoil.  That said, the German Democratic Republic (East) merging back to the Bundesrepublic (West) was fraught with problems for a decade, but they managed it.