Split over money
Doubtless, we all sympathise to some extent with Dr Ian Robertson’s plea for clarity on the economic impact of independence (Letters, 28 November), but is the expectation of certainty actually reasonable?
Last week, politicians were falling over themselves claiming that the Institute for Fiscal Studies report predicting what will happen over the next 40 years either supported or undermined the case for Scottish independence. I don’t recollect the institute producing an authoritative report eight years ago warning that western banking practices were bound to lead to economic disaster, so why trust them to foretell events decades ahead?
What happens in the next 40 years is dependent on many factors, not least the wisdom or folly of governments and, of course, “events, dear boy”.
Another highly amusing report yesterday quotes the former Czech president’s assertion that, although the aspiration to retain the same currency when the Czechs and Slovaks split failed, the subsequent adoption of distinct currencies was a complete non-event, causing no difficulties whatever. Yet, the wiseacres point to currency as a major potential problem for the break-up of the UK!
Perhaps, in the end, we non-experts can only follow our gut instincts, and it may well prove the wiser path.
I NOTED with considerable interest the comments by the former Czech Republic president, Vaclav Klaus, that it was “impossible” for that nation to keep a monetary union with Slovakia when Czechoslovakia was partitioned in 1993 (28 November).
These comments have been seized on by Unionists who use it as criticism of the potential for an independent Scotland to remain within the sterling zone.
What the reports curiously fail to mention, however, is that while both the Czech Republic and Slovakia retained a customs union and freedom of movement of labour, the monetary union was only conceived as a temporary measure. Both these nations were, therefore, always destined to adopt their own monetary policy, creating obvious political tensions.
In addition both republics established their own central banks. These situations would clearly not be the case with an independent Scotland in the sterling zone.
What this example makes clear is that political factors are vital in creating and sustaining monetary unions, and members must be willing to give up their independence in matters of money, credit and interest. An optimum currency area is a region no part of which insists on creating money and having a monetary policy of its own.
If there is a lesson it seems to be that even in an optimum currency area such as Scotland and the rest of the UK, markets will force any currency union apart unless there is the clear political desire to make it work.
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