SHARING sterling between an independent Scotland and the rest of the UK could lead to eurozone-style crises unless firm foundations are put in place, Bank of England governor Mark Carney has said. An effective union would also force a newly-independent Scotland to hand over some national sovereignty, he said in a speech outlining the potential risks and benefits of currency union. He intervened less than eightmonths before people in Scotland decide whether to leave the UK . "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, " said Mr Carney at a business lunch in Edinburgh . "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 ." Despite his conclusion, he made clear that any decision is for voters and parliaments, and that the bank would operate any union to the best of its ability. "Any arrangement to retain sterling in an independent Scotland would need to be negotiated between the Westminster and Scottish parliaments, " he said. "The Bank of England would implement whatever monetary arrangements were put in place." Mr Carney , who became governor last July, focused on the implications of Scottish independence in his speech only hours after his first faceto-face meeting with Scotland's First Minister, Alex Salmond . The pair met for private talks at Bute House, Mr Salmond's official residence in Edinburgh . The Scottish Government wants to retain the pound if the country votes for independence, establishing a "sterling zone" with the rest of the UK . Other proindependence groups, including the Scottish Green Party , argue for a separate currency. Technical discussions on sharing sterling, which started under Mr Carney's predecessor Sir Mervyn King , are expected to continue. UK ministers including Chancellor George Osborne have cast doubt on whether the arrangement is possible. A Treasury spokesman said the Scottish Government needed to come up with a plan B.
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