I wrote last night that Alex Salmond’s plan to use the pound come what amy after independence would lead to higher personal credit costs as well as higher national debt costs. According to Danny Alexander it might also compromise Scotland’s EU membership. He has a letter from the former EU Commissioner Oli Rehn who told him that it would “not be possible” for Scotland to join the EU while using someone else’s currency.
Rehn said in a letter sent to Danny today:
As to the question whether ‘sterlingisation’ were compatible with EU membership, the answer is that this would simply not be possible, since that would obviously imply a situation where the candidate country concerned would not have a monetary authority of its own and thus no necessary instruments of the EMU.
This certainly puts more doubt as if there wasn’t enough already on the Yes Campaign’s currency plans. No doubt they will have whole load eminent people lined up in the morning to tell us that it’s all going to be fine and we shouldn’t worry about it, but people aren’t daft. In fact, they will probably say that it strengthens their case for a currency union and surely the nasty UK wouldn’t deny them that, especially when they would have a mandate for it from the referendum. Except that the mandate wouldn’t apply to the rest of the UK.
Danny announced this a little while ago in a speech at Chatham House. He probably showed a little too much glee to be honest. A more thoughtful “look, we did try to investigate to see if it would be possible but regrettably it isn’t” tone might be a little more appropriate. We don’t really need more aggression and dissonance in all of this. People are turning off. The most common reaction of my Facebook friends to last week’s ill-tempered debate between Darling and Salmond was to switch of. A “more in sorrow than anger” approach might keep them listening.
Anyway, here’s what Danny said:
The nationalists say that they will be able to continue using the UK pound even if they become a separate state.Because, even if the rest of the UK doesn’t agree to a currency union, they have said that Scotland would use the pound without a formal agreement…
… this is an arrangement known as “sterlingisation”, which would mean Scotland would not have a central bank to set interest rates or act as a lender of last resort.
This is not only a bonkers idea which flies in the face of any reasonable notion of what independence means and which would impose costs and risks on people and businesses in Scotland…
… it is also incompatible with Scotland’s smooth re-entry into the EU.
I will tell you why.
Today I am publishing an exchange of letters between myself and former European Commissioner Olli Rehn, relating to the issue of Scottish independence.
Until a few weeks ago he was the man at the EU Commission in charge of economic and monetary affairs, including the euro.
He’s very clear on one point.
And I quote: “As to the question whether ‘sterlingisation’ were compatible with EU Membership, the answer is that this would simply not be possible.”
No country has ever joined the EU while using only the currency of another country at the point of accession.
As Rehn says in his letter, in 2008 the then Icelandic Government requested the possibility of unilateral ‘euro-isation’ of thekrona to stabilise its monetary conditions and as a shortcut to EU Membership.
The Commission’s response?
They flatly rejected it as against the Treaty.
This was exactly the same case for Montenegro in 2007 which was required to create its own monetary authority as part of the conditions of the EU.
There is a strong assumption in the EU Treaties that every member state will have its own central bank.
But under sterlingisation Scotland would not have a central bank or control over its monetary policy.
So let’s recap on the facts.
First, there will not be a currency union in the event of a ‘yes’ vote.
That would expose the rest of the UK to risks it couldn’t control, and would leave Scotland without the tools to steer its economy.
“One of Alex Salmond’s 3 Plans Bs is ‘sterlingisation’ – borrowing the pound, but without any access to the support or stability provided by the Bank of England.
Today we learn that that option is incompatible with EU Membership.
So an independent Scotland would face a simple choice – using the pound like Panama uses the dollar, or joining the EU.
It can’t have both. This shows yet again the nationalists failure to put forward a credible currency plan and the dangers it poses to the people of Scotland.
I think that people need to remember at the moment that the most crucial audience is the undecided voter. If you want them to hear your words, you have to get the tone right and talk to them, persuade them.