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Euro is 'least bad' option if Scots go it alone, says Balls

August 24, 2014

costs and the loss of key financial business and trade. Entry into the euro, Balls said, would be painful too, as the single currency area was geared to the economies of its biggest members - Germany, France and Italy - rather than smaller nations, but it was likely to be the only route. "For Scotland to join an arrangement like that would be hugely disadvantageous compared with the status quo today," said Balls.

He added: "A sterling currency area would be off the table. Attempting to use sterling as the currency of an independent nation without any say over the actual operation of that currency and Bank of England policy would put the Scottish economy in an impossible position, and it would accelerate what would happen anyway - the movement of financial services out of Scotland.

"There is no way you could have banks or insurance companies operating in Scotland when you don't have a lender of last resort, as monetary policy maker, to back the financial sector if you got into trouble. Scotland could attempt to go it alone with its own currency. That would be very expensive, very risky, and people would pay a big price in terms of higher interest rates for mortgages and loss of trade because it would make the business environment very unstable and difficult."

A spokesman for Salmond stood by the view that Scotland would keep sterling. "An independent Scotland will keep the pound because it's our currency, too, and pensions and public services will be more sustainable after a yes vote because Scotland's economy is stronger than the UK's."

The debate will be screened on BBC1 Scotland and across the rest of the United Kingdom on BBC2 from 8.30pm on Monday.

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Source: Observer (UK)

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