Currency remains a significant stumbling block…

So, on currency, the Governor of the Bank of England has said that currency union is incompatible with sovereignty. By which he means that any prospective rUK’s sovereignty as much as iScotland’s.

This short discussion above from the FT lays out some of the political complications that are likely to arise…

  • dougthedug

    But every UK leader says a CU is not happening so what’s all the fuss about?

    Or are they lying?

  • chrisjones2

    NAH…just Alex is

  • dougthedug

    Same question, different format.

    If Alex’s lying and there will be no currency union what’s all the fuss about?

    Or is he telling the truth?

  • Bryan Magee

    This helps to explain why currency union is not attractive to the British side, post yes. We on the British side post yes will not want to have a Germany-Greece situation, and have to play the role of Germany.

  • Zig70

    To me the whole point is to blow apart the union of equals. The more England say you can’t, the more the wedge is driven. To make the English comes across as the ruling class. It’s Scotland’s pound too, isn’t it? Worst case, a Scottish pound tracking sterling isn’t a big leap. I wouldn’t worry, the lowland Scots always sell up to the English for a few coins anyway. I expect some monetary gift next week.

  • terence patrick hewett

    After the calamitous and unresolved EU experience of the Euro in a currency without Fiscal Union; the SNP still continue to advocate just this disasterous course. The question is: Why? they must know that it would be a disaster for both sides: encouraging profligacy on one side and un-accountability for the other. Do they think that the British voters can’t tell a bum steer when the see it?

  • gunterprien

    England can’t play the role of Germany.
    Germany is based on manufacturing industry, selling exports and generating wealth.
    Britain has squandered that heritage. To their eternal shame ( One reason why I’m anti Unionist- British incompetence in this area)

    Britain reminds me of Detroit..With added North Sea oil ( keeping them afloat) and an enlarged, engorged banking system. Which hoovered up 90% of so called Uk wealth in the recent bailout.Nice.
    Who with any common sense wants a piece of that.
    Who looks at the de- industralized UK and said..Yum. ..Yes..I want a piece of that?

  • Bryan Magee

    Well to be fair a lot of Germans when I speak to them have envied Britain’s creativity and entrepreneurship. The German and British economies are certainly different, and they are different models of industry and finance. Britain has strengths in many traditional industries such as aerospace and pharmaceuticals as well as in services.

    Britain would be like Germany because as the main country in the currency union, it would have the responsibility to bail out the smaller one, act as lender of last resort, set the interest rates, and impose fiscal discipline when needed. Its not a role Britian would find attractive post a yes. That’s why currency union is not attractive to the post yes British. I don’t think there is any sign of wanting to take on that role.

  • terence patrick hewett

    It is interesting to compare the economy of Britain with that of Germany: in many respects they are surprisingly similar. OECD data expressed in % of GDP:

    Agriculture: B 0.7% G 0.8%

    Service sector B 78% G 71%

    Industry B 21% G 29.7%

    GDP B $ 2.4trillion G $3.5 trillion

    It is in the area of industry where there is the most divergence: in Britain 12.6% of the 21% industrial sector GDP is composed of manufacturing: in Germany nearly all of the 29.7% industrial sector is composed of manufacturing. Britain’s industrial sector is far more diverse, but in Britain the 12.6% of manufacturing count for fully 83% of their exports.

  • gunterprien

    I suspect those Germans were just been nice to you.Maybe they want you to ..I dunno..Buy more VW Golfs perhaps.
    Aerospace..Do you mean BaE??
    Coz the wings made for Airbus is owned bt Eads..Which is a European not British company.
    And BaE is backed up by British taxpayers money, both directly and thru MoD orders. So. that is State sponsored and wouldn’t exist without these handouts. I rule it out.
    So what happened to Scammel trucks. MG sports Cars. BSA motorcycles. Lucas Electrics. English Electric,ERF trucks. Foden trucks..Sheffield steel.Norton motorcycles. British Leyland. Wolsely.
    You and other Unionists might try gloss over all this.
    But very few things are made in England.
    And of those few things most are foreign owned.
    Eads Aerospace..Not British.
    Honda Cars Not British.
    Toyota ” ” ” ”
    BMW Mini..” “” “”
    Jaguar Land Rover “” “””
    British electricty..French or German.
    British Water..French and Chinese.

    Of that 10% of industry engaged in manufacturing the majority is NOT British owned.
    You have even sold off the Ultilities. For heavens sake.
    What German would envy that???

  • Bryan Magee

    No I don’t think that’s true about those Germans, though you will have to trust me on that. There are a lot of German and French people working in the UK. The official attitude to ownership has been very open to outsiders, so that government has not tried a protectionist approach especially with regard to ownership – different from the approach of France. In Germany it is harder to buy a major company.

    But none of this actually counters my point, : that the UK will not wish to adopt the role of the Germans in the Eurozone, a role the UK would have to adopt. The larger economy would have to be the one to to bail out the smaller one, in a currency union, act as lender of last resort, set the interest rates, and impose and police fiscal discipline rules, when needed. Its not a role Britain would find attractive post a yes. Its a role needed in currency unions. That’s why the UK refusal to join a currency union is a credible position.

  • barnshee

    “the lowland Scots always sell up ”

    Since the “Highlands” begin allegedly at Stirling their is almost SFA other than Aberdeen above Stirling. So that’s most “Scots” in the “lowlands”

    The Scots can do a “punt” invent a currency and tie it to the pound and then sink or swim with it.

    The can also do an “Irish” and export any problems -(surplus population,unemployment etc) to its next door neighbour should the wheels come off in any new “Scotland”. British passport holders and all that

  • Neil

    Give the 10 bn trade defecit in the UK vs the 20 bn trade surplus in Germany I think the UK govt would wet their pants to get close to being comparable to Germany. Won’t happen anytime soon.

  • gunterprien

    “The can also do an “Irish” and export any problems…”
    Yes and Britain is doing so well.
    BTW Emigration from Ireland in the 90 years post 1922 is about half of what it was in the 90 years pre 1922.

    So please. Little Englander tell me more about running a State.
    Whilst I preview these brochures of the next British car I am going to buy.
    My brother wants a British Motorcycle.
    My Uncle owns a transport company he wants a Scammell or Leyland truck.
    And My nephew wants to work in the Merchant Navy ,. He is awaiting a ship to be built in a British Yard. Owned by a British Company under the Red Duster.
    Oh silly me. That doesn’t exist anymore due to the bang up methods that Britain made in running it’s affairs.
    so I shall buy a German Car.
    My brother will buy an Italian MotoGuzzi.
    My Uncle will buy Scania or Volvo. Or MaN. Or Renault or I dunno DAF.
    And My nephew is working in the Merchant Navy on a Dutch built coaster.
    But the English closed down their industry coz that’s ALL done better and cheaper in the Far East these days…Right?
    Italy. Germany, Scandavia must aLL be in Asia..I forgot.
    Silly me Part Deux.
    I am getting very forgetful.
    Must book a cruise.
    It seems the French, Italian Finnish and German shipyards have all delivered some shiny new cruise ships in 2014.
    You got to admire that Asian engineering.

    So you we’re saying. UK. What?

  • barnshee

    “Emigration from Ireland in the 90 years post 1922 is about half of what it was in the 90 years pre 1922.”

    a HA HA HA
    managed to cut it a bit

    “But the English closed down their industry coz that’s ALL done better and cheaper in the Far East these days…Right?”

    Its called comparative advantage in the Economic text books
    -now remind me again about the Irish manufacturing industry

  • gunterprien

    Ireland was subject to the English Navigation Acts..A perverted wish of English Merchant classes..They did for Irish Manufacturing what the Penal Laws did for the Population. Read about them sometime.
    In the 90 years since independence Ireland is one of the largest exporters of software in the World.
    “..Cut it a bit..”
    No. At least by half. and the population has grown much more than when it was under British colonisation.
    One thing is for sure..Under British rue emigration would still occur.
    Only 300,000 Brits have left England for Ireland..And I can’t see that happening under British rule.
    So those 300,000 have felt Ireland is doing something right.
    “it’s called comparative advantage….”
    Really So Italy, Germany, Sweden, Finland , France have all comparative advantage have they? Explain that one?
    Or are you glad that the dirty smelly metal bashing industries are all but dead ducks in the Uk(raine)?
    please park your condescension.
    It’s really not necessary..And you certainly don’t earn it.
    Coz Uk is a mess.
    Mismanaged. misruled and mistaken.

  • Bryan Magee

    But doesn’t that reinforce the idea that it’s quite credible the UK would not want to take the role that Germany (predominantly) had had to take on in as biggest economy in its Currency Union (the Eurozone).

  • Neil

    It’s credible. Like many Scots I suspect in the event of a divorce the English may not carry through on their threat to give away the family silver to get back at the ex.
    No shared currency means transaction fees on billions of trade, plus the inevitable lost trade for both countries. Cutting off one’s nose to spite one’s face springs to mind.
    I have no doubt the English don’t want to take on the German role. They don’t want Scottish independence. But what they want and what they get may not be the same thing.

  • Bryan Magee

    But Neil trade can happen without Currency Union – the Panama solution has no Currency Union and no currency transaction costs because Scotland uses sterling without monetary union. So assuming that Scotland wants to keep the £ the UK would not incur those costs by refusing CU.

    There’s a good short video here:

  • terence patrick hewett

    It seems to me that the SNPadministration has an inflated idea of what a UK government of whatever stripe can (or would wish to) deliver: for Scotland’s withdrawal from the union will engender a whole new ball game. Externally it is likely to weaken NATO, change the European balance of power and degrade European stability (Catalonia is only the start). Internally it will result in a disembowelled Labour Party. A fractured Tory Party. A possibility of renewed hostilities in NI and a possible political re-alignment of fundamental proportions; who knows what sort of rough beast, its hour come round at last, will slouch towards Westminster to be born: and that rough beast is unlikely to go gently into that good night.

    Of course all this is an oppotunity for a fundamental overdue constitutional change

  • Bryan Magee

    Paul de Grewe warns Britain would be Troika and Scotland Greece:

  • barnshee

    “Mismanaged. misruled”

    No disagreement there

    “Italy, Germany, Sweden, Finland , France”
    “comparative advantage have they”

    Germany Finland certainly– higher productivity per head, generally higher quality of product (VW Merc Audi to name one industry) Italy France bankrupt states sheltering under German wing

  • Kevin Breslin

    When everyone used gold as currency, were nations who didn’t have gold mines slaves to those that did?