Anybody expecting Mark Carney to go to Scotland and say something controversial about the independence debate was always going to be disappointed.
The Bank of England tries its best to steer clear of politics (not always entirely successfully), so this was an exercise in carefully crafted fence-sitting. Metaphorically, he plonked one leg on either side of Hadrian's Wall.
For the most part, the speech was a bog-standard run-through of the pros and cons of monetary union, and both sides in the debate will be able to take something from the governor's analysis of what makes for a successful currency union. Alex Salmond can claim that Threadneedle Street's analysis shows it is perfectly feasible for an independent Scotland to use the pound and have interest rates set in London. If Scotland votes yes in September, a deal could be thrashed out between Scotland's first minister and David Cameron.
On the other hand, Alistair Darling can argue that the subtext of Carney's speech was that the arrangement will only work if the proper foundations are put in place, and that the lesson of the eurozone is that this is more difficult than it looks.
Carney said there were three ingredients necessary for a successful currency union: an integrated economy that has free movement of labour, capital and goods; a banking union; and a fiscal pact with teeth that would prevent an independent Scotland playing fast and loose with its public finances at the expense of the rest of the UK.
Scotland has close economic ties with the rest of the UK, so the really big issues would be the shape of a future banking union and the arrangements for fiscal (tax and spending) policy. Scotland, Carney said, had benefited from its banking union with the UK, which provides a single supervisor, a single deposit guarantee scheme and a common central bank able to act as a lender of last resort.
After London, Edinburgh is the UK's most important banking centre and the governor stressed that the current arrangements had helped ensure "that Scotland can sustain a banking system whose collective balance sheet is substantially larger than its GDP". The euro area, he added, had shown the dangers of not having the right sort of banking arrangements in place.
The same risks, Carney said, applied to fiscal policy. Problems in one country were likely to spread across the border. It would be in the interests of other countries in a banking union to bail out a country in crisis, reducing the incentives to act prudently. "At a minimum, this 'moral hazard' problem suggests the need for tight fiscal rules, to enforce prudent behaviours for all in the union, although credible sanctions for breaking those rules are hard to develop."
Scotland is seeking to loosen its ties with the rest of the UK at the very time the eurozone is seeking closer integration between its 18 members. As such, Carney's overt message to Salmond was that a "durable, successful currency union requires some ceding of national sovereignty". The hidden message was that negotiations with the Treasury will be tough. Not least because, despite Carney's studious declaration of neutrality, the Bank will ensure a hard bargain is struck.
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