Bank of England Governor Mark Carney has trashed the claim that Scotland will be able to keep the pound if the country votes for independence.
In a blow to Scotland’s First Minister Alex Salmond’s argument that Scotland would be able to remain as part of a currency union after independence, Carney told the audience at the Trade Union Congress on Tuesday that the plan would be “incompatible with sovereignty”. He added that such an arrangement risked a repeat of the problems faced by eurozone countries.
Here is the key part of his answer (emphasis mine):
First, you have to have free movement of capital, labour, goods and services across the various parts of the currency union. Secondly, you need something called a banking union … including a lender of last resort. And thirdly, you need some sort of fiscal arrangement so that tax revenues and spending flow across those borders. You only have to look across the continent to look at what happens if you don’t have all of those components in place.
His intervention on the currency debate will be an embarrassment for the Yes campaign that has yet to offer a firm alternative to a currency union. In effect, Carney was saying that a formal sharing of currency is incompatible with independence and that such an arrangement would be more akin to federalization.
In the second of their live TV debates Salmond told Alistair Darling, leader of the Better Together campaign, that the pound “belongs to Scotland as much as it belongs to England. It’s our pound as well as your pound.” Carney has now replied — actually, Alex, it’s not.
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