Posts Tagged ‘Pound Sterling’

Scotland vote is devolving into “yes” for a pink €

August 24, 2014

I am trying from a distance to follow the arguments being aired in Scotland about the joys and sorrows to be expected from a “yes” or a “no” vote in the referendum on independence to be held on 18th September.

Most of the discussions / debates I have heard have just been so much hot air (shades of grey being presented as black or white). The only issue that I have found to be of any real relevance is whether Scotland really wants to become a Euro country or not. If Scotland votes “yes”, it will have to reapply to become a member of the European Union and while that membership will not be delayed too long, an independent Scottish pound will be swamped and Scotland will probably have little chance to avoid entering the European Monetary Union and adopting the €.

Though Alex Salmond seems to be saying that Scotland can continue with the £, that is just wishful thinking and is not within his control. He may still call it the Scots Pound and he could peg it either to the the £ or to the US$. But then it will probably become a target for currency speculation and there will not be enough weight in the Scottish economy to withstand such speculation. As fracking grows in the UK and the North Sea reserves shrink it can only get worse. For a small economy forced to join the €, there are – I think – more disadvantages than there are advantages. And for small countries dependent primarily upon tourism it is worst. Larger economies with large exports have the greatest benefit.

In any event, the Scottish referendum will effectively decide whether it will remain a Sterling country or will join the Euro. And if they decide to join the Euro, they may not have a completely Red Euro but it could well be pink.

Pink Scots Euro

Pink Scots Euro

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