This is one of those weeks when I wish that I could write three columns, as there are so many important issues which should be covered. But I must be selective and have decided that the issue topping the list in terms of importance is that of Over the past few weeks I have been poring over all the various learned contributions on this topic in order to produce a paper for Scottish Financial Enterprise and the
That paper - which is available on the DHI website - was discussed at an SFE/DHI seminar with an excellent panel and an informed and challenging audience. The discussion with the panel and the audience has helped to firm up my views.
To summarise my revised conclusions, there appear to be only (at the most) two realistic options available on the currency front - and one of those may turn out to be unobtainable. In my paper I discuss four options: (i) a formal sterling currency union, (ii) informal use of sterling, (iii) a new currency and (iv) adoption of the euro.
Closer examination suggests that informal use of sterling would likely prove either unfeasible or potentially disastrous; certainly a risk too far. Movement to the euro could prove a longer-term possibility, but it would not be available for the first several years of independence and thereafter the path to euro adoption could be long and arduous. So that leaves either a formal currency union or a new currency for a newly independent
There are (at least) two major problems as far as a formal currency union is concerned. First, all three of the major political parties in the
The great advantage of a continuing currency union would be the maintenance of currency stability with our major trading and economic partner - and no transaction costs on purchases or sales with this partner. On the balance sheet against this big positive, however, must be set the distinct risk that the macro policies, set in the interests of rUK, would become increasingly inappropriate for
The SNP's White Paper effectively accepts that the continuing sterling currency union might be only a short-term solution, but what would follow? Would the financial markets decide that, even while remaining within a currency union, the uncertainties as to sustainability and what comes next would mean borrowing costs for
So a continuing currency union may - rightly or wrongly - be ruled out by the next
Pegging to sterling would yield the benefits of currency stability referred to within the currency union context. But this would involve constraining Scottish policies significantly to achieve and sustain that peg. Floating free would provide what
Clearly, this concept of a new currency is no panacea. Research for the
In no world of reality would the new fledgling state of
This is one of those weeks when I wish that I could write three columns, as there are so many important issues which should be covered. But I must be selective and have decided that the issue topping the list in terms of importance is that of
Over the past few weeks I have been poring over all the various learned contributions on this topic in order to produce a paper for Scottish Financial Enterprise and the