By Daniel Hunter
Mark Carney, the governor of the Bank of England says “careful consideration” would be needed for any plans for the UK and Scotland to share the pound, if Scotland voted “Yes” for Scottish Independence.
In a speech in Edinburgh, the governor said strong foundations would need to be put in place if there were to be a currency union, a so-called ‘Sterling Zone’, between the UK and Scotland.
Mr Carney said: “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.
The governor of the Bank of England pointed to the eurozone to highlights the risks of not taking careful consideration and setting foundations in place.
He said: “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.”
This morning, Mark Carney met with Scotland’s first minister, Alex Salmond, to discuss to implications of Scotland using the Sterling pound currency, should Scotland vote “Yes” in the referendum on independence.
After the meeting, Mr Salmond said Mr Carney and he had agreed to continue discussions on how a currency union would work.
The Scottish First Minister said: “The Bank of England is an independent institution. It doesn’t take a role in party politics but we had a splendid discussion and I think crucially have agreed to continue the technical discussions, not negotiations but the technical discussions, that the Bank of England has been having with the Scottish government so that our proposals are soundly based on technical terms.
“When the governor speaks we will hear what he has to say. He will be giving a technocratic assessment of the institutional arrangements necessary to make a currency union work. He won’t be advocating it or arguing against it. That is a matter for the Scottish people.
“He won’t be saying whether Scotland will be better off or worse off as an independent country. That is a matter for the Scottish people to decide.”
If Scotland votes “Yes”, then the SNP wants to continue using the Bank of England under a new currency union, like the eurozone.
The UK government has previously said that such an agreement would be unlikely.
The governor has said he will provide “technical, objective, dry analysis” of the issues surrounding the potential situations.
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