Joseph Stiglitz, the economist who sits on Nicola Sturgeon’s Council of Economic Advisers, said a free-floating Scottish pound could be used to stimulate the economy and lower its towering deficit.
Scotland spent nearly £15 billion more than it generated last year – a 9.5 per cent deficit which outstrips crisis-hit Greece.
The Scottish Government is examining ways to keep Scotland in the European Union (EU) after Brexit but critics have pointed out the EU requires a deficit below three per cent and a commitment to join the euro.
Mr Stiglitz said taking Scotland into the euro would be “a mistake” but insisted there is a greater willingness in the EU to accept countries which do not want to use the euro.
Alex Salmond, the former first minister who appointed Mr Stiglitz to his government advisory team, has said the shared currency plan was a key weakness in his 2014 independence campaign and allowed him to be “gazumped” by Westminster.
In the run-up to the referendum in 2014, the Fiscal Commission Working Group – part of the Council of Economic Advisers – made a “clear recommendation” for Scotland to retain the pound in a formal currency union with the rest of the UK, if there was a Yes vote.
Reflecting on this plan on BBC Radio Scotland Mr Stiglitz said: “They wanted the smoothest transition possible.
“I think, in hindsight, that may have been a mistake.”
Scottish Conservative finance spokesman Murdo Fraser said Mr Stiglitz’s comments demonstrate that the SNP’s “dodgy prospectus is falling to pieces”.
Scottish Labour leader Kezia Dugdale said: “What we have today works. Being part of the UK means we can use the pound and have access to the Bank of England in times of difficulty for our economy.”