Tony Yates argues that if an independent Scotland
wanted to use Sterling as its money, then the rest of the UK (RUK) would want
to insist on prudent Scottish fiscal policy “to guard against a market run on
Scottish bonds”.
Strikes me that RUK’s attitude to a profligate and independent Scotland
that suffered a run on its bonds would be “Tough luck mate: you wanted
independence and the right to your own fiscal policy. Now you’ll have to live
with the consequences”.
That’s very much Germany’s attitude to Greece. Of course a
Greek/Scottish bond problem is not entirely beneficial for Germany/RUK
respectively. But the really big penalty in Europe is being paid by the
periphery, not Germany. Likewise, the real penalty would be paid by Scotland,
not RUK.
But of course Scotland would try to have its cake and eat it: in the
event of problems, Scotland would get all emotional about Scotland and RUK’s
shared history. Scottish politicians would be on the train to London, begging
for free money.
Perhaps the solution is to spell out in very blunt terms in the
independence agreement what the consequences of a run on Scottish bonds would
be.
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