Worried about Scotland vote, UK unveils big threat

The “no” campaign on the question of Scottish independence just rolled out its big guns. The three top political parties in the United Kingdom came out Thursday to jointly promise that no matter who forms the next government, none of them would agree to join a currency union with an independent Scotland. The timing of this explicit threat of economic chaos – seven months ahead of the referendum – suggests the “no” campaign was growing nervous about recent warming of the Scottish electorate toward independence, says our correspondent in Glasgow.

“This is the ‘no’ campaign’s big weapon, and they hit it now, they hit early. So they had been rattled. You have to imagine if they did what they are doing now a month before polling, they would have almost wiped the ‘yes’ campaign out. There’s still potentially time for the ‘yes’ campaign to change it,” our correspondent says. But this pocketbook uncertainty – with voters saying the economy is their No. 1 concern – will be the “yes” campaign’s biggest challenge ahead.

Scotland’s “yes” campaign has been arguing that an independent Scotland would keep the pound sterling as its currency. The plan would be to negotiate a formal monetary union with the remaining UK where the Bank of England would become accountable to both countries.

The UK political leadership said Thursday it would not negotiate any such deal, pointing to a new UK Treasury report that draws negative parallels between the proposed Sterling Area and the eurozone. Scottish voters will well remember, our correspondent says, that during the eurocrisis, governments with a shared currency but diverging political authority lost the needed flexibility to individually adjust monetary policy. “[T]he experience of the global financial crisis suggests that countries with more flexible macroeconomic policy regimes, in particular with more direct control over their monetary policy, can be better equipped through periods of very severe economic stress,” the report reads.

Scotland could, of course, simply continue to use the currency without a negotiated union. And some commentators have mentioned examples... For the rest of the story, continue reading at our new business publication Monitor Global Outlook.