Those pressing for a yes vote in next year's referendum on Scottish independence need to convince voters that the country will prosper under a new currency and macro-economic regime. This will prove difficult, not because the current system is perfect but because all options have drawbacks.
A Treasury paper published puts the case for the status quo. Although some in Scotland might cavil at the claim that the UK is one of the most successful monetary, fiscal and political unions in history, first minister Alex Salmond understands the sensitivity of this issue. That's why the SNP favours continuing to use sterling in a formal currency union if the referendum goes its way.
This is one of the options picked apart by the Treasury. It would not be a simple matter of Salmond choosing to have a formal currency union; David Cameron would have to agree to it, too. And London would certainly impose stringent monetary, fiscal and banking conditions in an attempt to prevent spillover risks to the rest of the UK.
Scotland could opt to use sterling without a formal agreement, akin to the way in which some Latin American countries such as Ecuador use the dollar. This involves a considerable loss of autonomy, as does the third option – joining the euro. Indeed, the only truly independent route would be a new Scottish currency run by a central bank in Edinburgh, but the experience of small countries suggests that this can be a bumpy ride.
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