Independence ‘risks currency catastrophe’

CHIEF Treasury Secretary Danny Alexander will today launch the most significant assault on the push for Scottish independence by raising the spectre of economic disaster over the problem of what currency the country would adopt.

The Lib Dem MP, who has been at the heart of the UK government’s negotiations on tackling the eurozone crisis, said the catastrophe unfolding on the continent meant that Scotland could no longer ignore the currency issue.

And he will warn it could destroy Edinburgh as a major international financial centre.

Speaking to The Scotsman ahead of his keynote speech in Edinburgh to the Scottish Council for Development and Industry today, Mr Alexander insisted he was “raising concerns as a proud Scot”.

But he said the fate of countries such as Greece, Italy, Ireland and Portugal showed the problems Scotland would face if it decided to go it alone without control over its currency. The SNP policy is for Scotland to keep using the pound after independence and then call a referendum on whether to join the euro “when conditions are right”.

The SNP has not promoted the idea of a Scottish currency, and Mr Alexander believes this is because it would not have any confidence among the Scottish public.

Last night he said: “This issue can no longer be brushed under the carpet.”

In his speech today, Mr Alexander will outline his case that the best option is to remain in the “most successful monetary and political union in history”.

He is due to say: “If Scotland wants to keep the pound, and if Scotland wants to secure in full the benefits of keeping the pound, then it can only do so by remaining part of the United Kingdom monetary and fiscal union.

“To do anything else would put those benefits at risk.”

He will claim that “Scotland within the monetary union, but fiscally independent, creates similar risks to those we see in the eurozone”. But he will warn that an even worse option is simply using the pound with no formal agreement.

“In that scenario, it would have no say over its own monetary policy as set by the Bank of England. And in a Scottish crisis the Bank would not be obliged to step in for Scotland.

“Stating the obvious, independent from the rest of the UK, Scotland would have access to massively less fiscal firepower.”

In the heart of Edinburgh’s financial district, he will say the reduced access to such “firepower” would have “implications for Scotland’s celebrated role as a home to some of the largest financial institutions”. “If an independent Scotland had to undertake such huge recapitalisations itself, there is a high risk that the very solvency of the country, let alone its banks, would come under market attack.”

Last night, a spokesman for SNP finance secretary John Swinney hit back: “This is nonsense – typical of the Tory-style scaremongering we have come to expect from Danny Alexander.

“The reality is that there are nearly 40 countries in the world in currency unions, and they are all independent nations.

“Independence will give Scotland control of the economic and fiscal levers we need to strengthen recovery, boost growth and create jobs.”