A new report published on April 23 by the UK Treasury on what currency Scotland would use should Scots choose to separate from the rest of Britain in the forthcoming independence referendum “marks the start of a new skirmish on one of the most important policy battlegrounds over which next year's historic referendum will be fought,” writes the Financial Times.
The report said that if Scotland chose independence, it would then have to choose between joining the euro, launching its own currency or keeping the pound – the favoured option for the governing pro-independence Scottish National Party. The FT continues –
The Scottish government wants to stick with the pound, arguing that monetary union would promote stability for businesses and the economies on both sides of the border. But George Osborne, chancellor of the exchequer, has suggested the UK would not want a euro-style monetary union with a foreign government – even if the state was Scotland. [...] If the pound continued to be used in Scotland, [Scottish First Minister Alex] Salmond would find his ability to tax and spend severely curtailed. The Bank of England would rightly demand significant fiscal and regulatory control as the price for taking on risk as lender of last resort.
For The Herald’s columnist, Ian Bell, “the argument over the currency that might be used in an independent Scotland is essentially political, not economic.” He writes –
Choose independence and hope for a formal currency union, says Mr Osborne, and we will demand control over the essentials of your economy. In fact, we will demand more control than the Germans exert over the Eurozone. [...] In some circles, it's known as a threat.