Herald letter: Scotland’s currency (“Haud me back”).

THERE is another very good reason “sterlingisation” is a non-starter for an independent Scotland within the EU: quite simply it is impossible to see how or why Brussels would allow a member state to use the currency of a non-member state as an international currency in direct competition to the euro (Agenda: “Not such a sterling idea for justice and sovereignty”, The Herald, February 13). If Scotland were to do so, why should, for example, other states not use the pound as well, or the dollar, or the yen?

At the same time, there are major impediments to a new independent Scottish currency. On the one side there is the question of savings: would these assets of individuals and families be forcibly converted from sterling to poonds (or whatever they will be called)? Conversely, there is the issue of existing mortgages and loans: in 99 per cent of cases, these are contracted to be repaid in pounds sterling.

As the currency of an untried economy that would immediately be depressed by the loss of a large chunk of its income in the form of tens of billions of fiscal transfers from the rest of UK, the poond would undoubtedly be valued by the markets at a level lower than the pound. So the case of the SNP will be: “Vote for independence to devalue your savings and put up your mortgage repayments.” Tempting.

Peter A. Russell

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