The governor of the Bank of England has warned that an independent Scotland would have to give up some power if it entered into a currency union with the remainder of the UK.
Mark Carney also claimed sharing the pound sterling could lead to a eurozone-type crisis unless the Scottish and UK governments could agree to risk arrangements that were both consistent with sovereignty and sufficient to maintain financial stability.
He told business leaders in Edinburgh yesterday that a currency union required a common fiscal backstop from a central bank that must be able to act as a lender of last resort – an arrangement that required the approval of the UK chancellor.
“If such deliberations ever were to happen, they would need to consider carefully what the economics of currency unions suggest are the necessary foundations for a durable union, particularly given the clear risks if these foundations are not in place.
“Those risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance.
“The euro area is now beginning to rectify its institutional shortcomings but further, very significant steps must be taken to expand the sharing of risks and pooling of fiscal resources. In short, a durable, successful currency union requires some ceding of national sovereignty.
“It is likely that similar institutional arrangements would be necessary to support a monetary union between an independent Scotland and the rest of the UK.”
Mr Carney, a Canadian who became governor in July, said the Bank of England would implement whatever monetary arrangements were put in place if there were a Yes vote on September 18.
“Decisions that cede sovereignty and limit autonomy are rightly choices for elected governments and involve considerations beyond mere economics,” he added.
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