Scottish independence advocates are “deluding” themselves if they believe that the country would be allowed to remain in a currency union with the UK whilst controlling its own financial affairs, one of Europe’s major banks has said.
Analysts at Societe Generale said Scotland would have an “immense” task ahead of it were voters to opt for independence in next month’s referendum, disparaging claims from the “Yes” camp that the country would easily gain EU membership and grow rich off oil revenues.
On Tuesday, Standard Life, one of Scotland’s largest businesses, said Holyrood had failed to address concerns it had raised over the consequences of independence.
The FTSE 100 insurer, which earlier this year raised questions over currency, regulation and EU membership, and warned that it is preparing to shift certain operations south of the border if necessary, said it did “not believe that further clarity has been provided on any of these issues”.
Alex Salmond, Scotland’s First Minister, has said that an independent Scotland would remain in the sterling monetary framework, a claim which has been rejected by all major Westminster parties, and that he would use a period in between next month’s vote and secession in 2016 to negotiate EU membership.
However, Brian Hilliard, chief UK economist at Societe Generale, poured cold water on Mr Salmond’s claims.
Research from the bank claimed that an independent Scotland would have to work harder than a combined UK to get its deficit under control, and would potentially have to commit to joining the euro if it wanted to gain access to the European Union.
“To persuade the UK to let it continue to use the pound as its currency in a formal currency union… looks like a pipedream,” he said.
“That would mean that Scotland would then have to create its own currency with all that entails – a new central bank, lender of last resort facilities, [and] build-up of foreign exchange reserves.
“The yes camp is deluding itself if it believes it can both retain the pound but also become master of its own fiscal affairs.”
Failing to remain in the currency union would mean Scotland’s banks losing the Bank of England as a lender of last resort, a scenario that many believe would force them south of the border.
Mr Salmond has threatened not to take an independent Scotland’s share of the UK’s debt should it be barred from the sterling monetary framework, but Societe Generale said this was an empty threat.
“[Not guaranteeing its share] is unwise and might generate uncertainty in the financial markets,” the bank’s research said. “That commitment would certainly be made when negotiations get serious”.
Meanwhile, joining the EU would be difficult without an independent Scotland becoming part of the euro, since monetary union is now seen as a requirement of joining.
“The ‘Yes’ camp seems convinced that it could easily negotiate re-entry into the European Union as a separate state without committing to join the euro. This seems very unlikely,” Mr Hilliard said.
The bank also said North Sea oil “is no longer the crock of gold the Scots imagine it to be”, with the “Yes” camp exaggerating the tax receipts an independent Scotland would receive. It claimed that an independent Scotland’s budget deficit would be around one percentage point higher than the UK’s is at present.
“Scotland would face more fiscal tightening than were it to stay as part of the UK,” Societe Generale said. Standard Life, which on Tuesday reported a 12pc rise in first-half operating profits, warned in February that uncertainties related to Scottish independence were forcing it to consider moving parts of the business to the rest of the UK.
David Nish, the company’s chief executive, said that Standard Life had not been making a political comment when outlining the risks of independence.
He said the company, which employs 5,000 staff in Scotland, had continued to assess how it could react to independence. Standard Life shares rose 1.54pc.
telegraph.co.uk
Analysts at Societe Generale said Scotland would have an “immense” task ahead of it were voters to opt for independence in next month’s referendum, disparaging claims from the “Yes” camp that the country would easily gain EU membership and grow rich off oil revenues.
On Tuesday, Standard Life, one of Scotland’s largest businesses, said Holyrood had failed to address concerns it had raised over the consequences of independence.
The FTSE 100 insurer, which earlier this year raised questions over currency, regulation and EU membership, and warned that it is preparing to shift certain operations south of the border if necessary, said it did “not believe that further clarity has been provided on any of these issues”.
Alex Salmond, Scotland’s First Minister, has said that an independent Scotland would remain in the sterling monetary framework, a claim which has been rejected by all major Westminster parties, and that he would use a period in between next month’s vote and secession in 2016 to negotiate EU membership.
However, Brian Hilliard, chief UK economist at Societe Generale, poured cold water on Mr Salmond’s claims.
Research from the bank claimed that an independent Scotland would have to work harder than a combined UK to get its deficit under control, and would potentially have to commit to joining the euro if it wanted to gain access to the European Union.
“To persuade the UK to let it continue to use the pound as its currency in a formal currency union… looks like a pipedream,” he said.
“That would mean that Scotland would then have to create its own currency with all that entails – a new central bank, lender of last resort facilities, [and] build-up of foreign exchange reserves.
“The yes camp is deluding itself if it believes it can both retain the pound but also become master of its own fiscal affairs.”
Failing to remain in the currency union would mean Scotland’s banks losing the Bank of England as a lender of last resort, a scenario that many believe would force them south of the border.
Mr Salmond has threatened not to take an independent Scotland’s share of the UK’s debt should it be barred from the sterling monetary framework, but Societe Generale said this was an empty threat.
“[Not guaranteeing its share] is unwise and might generate uncertainty in the financial markets,” the bank’s research said. “That commitment would certainly be made when negotiations get serious”.
Meanwhile, joining the EU would be difficult without an independent Scotland becoming part of the euro, since monetary union is now seen as a requirement of joining.
“The ‘Yes’ camp seems convinced that it could easily negotiate re-entry into the European Union as a separate state without committing to join the euro. This seems very unlikely,” Mr Hilliard said.
The bank also said North Sea oil “is no longer the crock of gold the Scots imagine it to be”, with the “Yes” camp exaggerating the tax receipts an independent Scotland would receive. It claimed that an independent Scotland’s budget deficit would be around one percentage point higher than the UK’s is at present.
“Scotland would face more fiscal tightening than were it to stay as part of the UK,” Societe Generale said. Standard Life, which on Tuesday reported a 12pc rise in first-half operating profits, warned in February that uncertainties related to Scottish independence were forcing it to consider moving parts of the business to the rest of the UK.
David Nish, the company’s chief executive, said that Standard Life had not been making a political comment when outlining the risks of independence.
He said the company, which employs 5,000 staff in Scotland, had continued to assess how it could react to independence. Standard Life shares rose 1.54pc.
telegraph.co.uk
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