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Carney: Scotland has to cede sovereignty if it wants pound

by Max Skjönsberg on Jan 29, 2014 at 13:27

Carney: Scotland has to cede sovereignty if it wants pound

Scotland would have to relinquish a degree of sovereignty if it would keep sterling as its currency in the event of becoming independent, according to governor of the Bank of England Mark Carney.

Scotland has signalled it would keep the pound if voting for independence in September. However, Carney (pictured) said in a speech in Edinburgh that the experience of the eurozone shows that a ‘durable, successful currency union requires some ceding of national sovereignty.’

Carney said a prerequisite would be a banking union between Scotland and the rest of the UK, referring to common supervisory standards, access to central bank liquidity and lender of last resort facilities, common resolution mechanisms, and a credible deposit guarantee scheme.

‘Without a banking union, cross-border capital flows can be restricted, the effectiveness of monetary policy impaired and, in the extreme, the viability of the union itself undermined,’ said Carney, speaking at a lunch hosted by the Scottish Council for Development and Industry.

According to Carney, a banking union would also need common fiscal arrangements, as ‘problems in one country are very likely to spill over to others.’

Referring to the European experience of the inadequacy of fiscal rules as opposed to fiscal mechanisms, Carney said the Scottish parliament and Westminster ‘would have to agree on whether fiscal rules were sufficient or whether…risk-sharing mechanisms were necessary’.

On the broader question of whether monetary union would be the right option if Scotland were to become independent, Carney said it was entirely up to the parliaments of Scotland and Westminster to negotiate and that the Bank of England would implement any outcome of such talks.

7 comments so far. Why not have your say?

Steve

Jan 29, 2014 at 14:03

Should the English have a referendum if Scotland votes for independence? Should the English have to bail out the failings of Scottish based firms (eg RBS)?

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Stuart Rathbone

Jan 29, 2014 at 14:35

I think he is being too soft, to me either the Scots go lock stock and barrel or they remain firmly under our boot. The squid will find a way around any construct the politicians make regardless, sometimes even with the tacit approval of said politicians on both sides (you only have to look at Greece). I have no view as to whether they should stay of go and if I was a Scot I would probably want to get out from under the heel of the English.

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dave king

Jan 29, 2014 at 14:44

Steve- We should have done what Iceland did- bail out the people not the bank.. (spoken as a Scot)- and Stuart - well said, you echo my sentiments as a Scot- we need out from the punitive heel- the problem is what revenue stream do we keep..? Do we now shout Freeeedom! It's our Water,Oil Wind (plenty of it!!) and Hydro Electricity? We can always sell you some!

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Stuart Rathbone

Jan 29, 2014 at 15:15

Dave,

For me you can have it all (but that will include the bloated public sector) and we stand and fall on both sides of the border on our own merits. Sadly you will not get our elected rulers giving up power that easily but I wish you all the best in your endeavours.

After all once the dust settles it should not be beyond the whit of man to negotiate and contract with each other across the divide despite the bureaucratic interventions of the political parasites.

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Keith Cobby

Jan 29, 2014 at 15:34

This debate is all very interesting but it is obvious the Scots won't vote for independence. However if they go they must go in totality. I cannot understand why they are discussing keeping the pound, it shows a lack of confidence.

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I Jenks

Jan 29, 2014 at 16:14

I don't pretend to understand all the practicalities and consequences of Scottish Independence. Don't have the time or the inclination to look at it in that great detail, especially as it appears that the smart money is on it not happening anyway.

It does seem to smack of wanting to have their cake and eat it though.

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andy

Jan 29, 2014 at 17:42

I still don't really understand all this - probably being a Scotsman living in England has something to do with it.

In my head - if Scotland votes for independence then everything else is up for negotiation.

From the banks (who carries the debt from the failed RBS and Bank of Scotland), to the oil (I hope someone has been paying attention to the direction of the border as the oil line in the North Sea continues to follow along the SW / NE direction of the land border rather than going straight out East) to the interest rate that London would charge Edinburgh (I can't imagine a small debt laden country would get a AA+ credit rating).

Seems like the only people who would really win are the lawyers (again).

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