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Comment by planetjones | Hacker News Reader

The general feeling is that this vote will now succeed. However, I think it's now almost certain that if Scotland does vote to become independent they will be forced to take the Euro as currency. Westminster said this would be the case with the first referendum but few believed it. Now voters in Scotland must believe it, given brexit. I think this will influence voters very strongly - and I think the issue of currency will be a central issue (if anybody other than the SNP can be bothered to campaign - the Westminster Government will have their hands full with brexit negotiations, so I doubt Scotland's independence will be top of their agenda)

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The currency question definitely needs straightening out, but Scotland will not immediately be forced to join the Euro; in fact Scotland can't formally join the Euro without spending two years in the ERM and meeting the convergence criteria with its own currency. Since meeting those criteria is pretty optional (and hard work!), joining the Euro can be postponed indefinitely.

Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, and Sweden are the members of the EU which have not joined the Euro because they don't meet the convergence criteria.

(My personal preference is to ditch the silly "shared" pound idea but define a Scottish Pound pegged to the GBP and using the existing notes as a transitional currency. Much as Ireland did.)

I think the point is the spiteful UK government would deliberately stop Scotland keeping the pound.

They can't stop Scotland from keeping the pound. They can stop Scotland from issuing its own notes valid in the remaining parts of the UK, but there is no way for the UK government to unilaterally decide that Scottish businesses and persons can't use GBP - they will have no jurisdiction over them if Scotland becomes independent.

There are serious disadvantages to using someone elses currency though.

The scottish government would likley be forced to strongly discourage the use of the UK pound to maintain fiscal control.

> would likley be forced to strongly discourage the use of the UK pound to maintain fiscal control

Do you mean "monetary control"? What do you mean by "strongly discourage"? Forced by whom, or by circumstances?

> Forced by whom

Forced by currency speculators. New currencies are always strained, and given an independent Scotland would be close to bankruptcy anyway, a fully-pegged currency would be (how do I say this) difficult.

You're talking pegging, but my earlier comment was about keeping GBP as the official currency. The two are separate options.

To allow other countries to decide you monetary policy is courting disaster.

"strongly discourage" is as easy as not accepting payment tax in pounds.

As I've said above they won't act as lender of last resort and they won't set monetary policy with regard to the needs of Scotland. A currency peg can be broken, though it is embarrassing and usually very expensive during the period you try and defend it - see "Black Wednesday".

Sticking with Sterling wouldn't even allow the option of crashing out of the monetary peg if needs be. I think you'd see an exodus of financial institutions' head offices down to London. An independent Scotland simply couldn't afford to bail out a large institution in Sterling, or even if it let banks fail couldn't afford the economic hit because its debts would be denominated in Sterling. Iceland was able to devalue by 60%, Greece wasn't able to.

The point of the currency debate is that it has consequences with whichever choice is taken. Separately applying to join the EU saying "yes I know I have to join the Euro, but I'm not actually going to do that" isn't the best strategy in the book. France may get to pull that kind of thing, but they're already in the tent.

Several valid points there, but none of them are relevant to what I pointed out, which was simply that if the Scottish government decides they want to use GBP, nobody can stop them (short of invading, I guess).

What vidarh said. Country A can use country B's currency without any consent; lots of countries do this. Some of the more volatile countries use dollars unofficially as "hard" currency for big purchases.

I'd expect Scotland to parallel Ireland's history of using the pound and pound-equivalent: https://en.wikipedia.org/wiki/Irish_pound

Sweden chose not to join the Euro.

Oddly - European nations that don't use the Euro are generally much better off: Norway (though not EU), Denmark, Sweden, UK.

In hindsight, the UK's decision to not join the Euro is widely accepted as smart.

The Euro is effectively a 'hard Germany currency' that has entrapped the periphery of Europe into a monetary system that massively favours the Germans. Maybe it could have worked out - but from 2000-ish to 2008 - world bankers assumed the Euro meant 'collective risk pooling' so the periphery countries loaded up on cheap debt. But when the crash happened - we discovered there were going to be no bailouts - leaving the periphery with a massive balance sheet problem, and the total inability to manage monetary policy - or rather - they're stuck on a 'strict currency' which favours Germany who already had several advantages.

But I agree, if Scotland does go indy, then it may very well introduce a pegged currency, which makes sense as something temporary.

This is not entirely true. The Netherlands, Austria, Luxembourg, Belgium and France for example fare just fine with the Euro.

The problems you mentioned (and some non-Euro countries being better off) are caused by structural problems in those countries, which are only tangentially related to the common currency. From an economic point of view those countries probably shouldn't have adopted the Euro so quickly in the first place but were allowed to do so nonetheless for political reasons.

It's difficult fix "structural problems" when the monetary policy is decided by others, and not following your interest.

Whoever thinks the Euro is a success has not been paying attention and probably don't understand how monetary policies (and money) works.

The Euro-area countries has been forced to follow procyclical policies, in a time when govern spending was necessary.

We don't fare just fine with the Euro. By having fixed exchange rates between countries, the only remaining economic variable that can be adjusted, is employment. (It doesn't matter if it's public or private employment). This is why the EU tells France and other countries to reduce the number of public employees, and why France has been losing one 1000-employee enterprise every day since the introduction of the Euro.

And the countries you listed are not the only ones in the Euro, think about how Spain, Portugal, Italy and Greece are faring with the Euro! It's worse than a war!

France is a bank crisis waiting to happen though...

> Denmark

The Danish Krone is pegged to the Euro, within a very tight margin.

http://www.xe.com/currencycharts/?from=DKK&to=EUR&view=5Y

And you've missed Poland, Hungary, Czechia, Romania and Bulgaria; these countries don't use the Euro, but aren't usually considered much better off.

Well, Eastern European countries are growing much more rapidly than the others.

But they are definitely different - they were closed economies, way behind, and there's advantages to their having the Euro (should they get it). Which is different from Greece/Spain.

Moreover, they want to be in the Euro :) the Swedes, Danes, English etc. chose to not use it.

> Oddly - European nations that don't use the Euro are generally much better off

So is it that countries that took the euro were hurt by it, or that countries with already strong currencies chose not to take the euro?

It could be both.

Anyway, it's not so difficult to see why to have the flexibility of adjusting your currency, independently of the rest of the system, to suit your current situation is a good thing.

micro-services anyone?

Scotland is fairly small country, starting their own currency does not make much sense.

Monte Negro is using euro, and is not even part of EU yet https://en.wikipedia.org/wiki/Montenegro_and_the_euro

Scotland already has three banks issuing their own bank notes (backed by GBP on deposit in their vaults). Independence wouldn't change that, except that the names on the notes would have to be changed from Pounds Stirling.

Those banks also have access to the Bank of England as a lender of last resort and the international market's backing for the UK's current economic policy. Scotland has a fairly developed financial sector, the currency issue is a lot more complicated than "pick one".

Pegging your currency to another when you don't have the fundamentals to match it tends to be of interest to George Soros, especially when you don't have much in the way of foreign currency reserves to defend it.

> Those banks also have access to the Bank of England as a lender of last resort

Can you imagine a future where the independent Scottish government could arrange a similar deal with another financial institution, to cover them until ECB took on the role?

> Pegging your currency to another when you don't have the fundamentals to match it tends to be of interest to George Soros

When was Black Wednesday for Montenegro?

Given that the European Central Bank doesn't act as a lender of last resort for individual banks (and really doesn't like being for the Eurozone, cf Greece) it isn't going to step in to cover Scotland. So you're either looking at another Government or perhaps one of the massive re-insurers, can you imagine what the insurance premiums would be on that arrangement?

The much more likely alternative is that the Bank of Scotland and Royal Bank move their HQ to London. Standard Life (and therefore Aberdeen Asset Management) probably as well. Not all their staff will move, but their profits will and some highly paid staff will go. That will in turn have an impact on the nascent FinTech sector.

> the European Central Bank doesn't act as a lender of last resort for individual banks

I do think they'd buy independent Scottish treasury bonds & then the independent Scottish government can use the proceeds for emergency lending. Isn't this how the German banks are covered?

If Scotland were in the Eurozone yes. Getting them to do that while applying to join, while also potentially giving none too subtle nods and winks that you don't actually intend ever adopting the Euro is stretching credibility.

OK! I understand your point.

Bulgarian or Bosnian currencies as well as many central African ones are pegged to Euro since the times of German mark and French frank. And suggered no "Sorosian" attack so far.

Small correction: the money is backed by GBP in Bank of England vaults (sent from Scotland). That would have to be transferred north if Scotland decides to create a National Bank.

>Independence wouldn't change that, except that the names on the notes would have to be changed from Pounds Stirling.

Pounds Sterling.

Stirling is a city in Scotland.

wow, a typo

the joke is they'd also have to be changed from that

Yeah, maybe they'll rename it pounds stirling. :)

* The Scottish economy is about 50x larger than Montenegro, so "fairly small" is relative. Similar-sized Denmark, Sweden and Norway have their own currency, let alone tiny Iceland.

* The EU and ECB aren't particularly happy that Montenegro is using the Euro without being a member anyway...(see your wiki link)

Scotland has about the same population as Norway or Ireland — 5.4 million — not Montenegro (0.62 million). GDP on the order of US $245Bn, 40-50 times higher than Montenegro. (And, geographically, 70% of the land area of England).

Politely, you might want to check your assumptions: I submit that if Norway can run a currency, or Ireland (which joined the Euro after running its own free-floating currency for multiple decades) then Scotland should be able to.

Furthermore, given the 99% fall in oil revenue since the previous referendum, the Union dividend (£9bn / year) and a deficit of 10% GDP, and state aid rules within the EU, the economic case for independence has dwindled, to put it mildly.

Politically, the case for independence is on the downside; both Theresa May and Ruth Davidson have higher net satisfaction rates than Sturgeon in Scotland, and the likelihood of a general election before EU exit is getting higher every day, but for other reasons. Peak Sturgeon has come 2 years too soon.

> both Theresa May and Ruth Davidson higher net satisfaction rates higher than Sturgeon

In Scotland? I'm extremely skeptical.

They must have meant 'in all of UK' by 'net'. In Scotland, impossible!

I was wondering if that's what they meant. But if they did it is an absurd statistic given that only Scotland gets to vote in their own referendum.

http://www.scotsman.com/news/politics/ruth-davidson-overtake...

From mid-september 2016. Couldn't find a more recent poll.

It's probably worth noting that the Scotsman has historically backed the Union and their audience are very pro-union, and generally pro conservative.

As I understand it, the poll which they based that article on didn't even ask the same question for each of the leaders, so the final results can't be seriously compared.

The poll was by Ipsos MORI, but I guess you already knew that.

There was an IPSOSmori survey to that tune in mid-September. It was contradicted by a following YouGov poll in November where Sturgeon was seen as doing better.

And of course "doing well in her job" doesn't matter much if 38% of Scots vote SNP vs 16% Tory voters (from the Yougov survey).

There are almost continual attacks on Sturgeon from Unionists in Scotland (and from England) - read any of the comment sections on the BBC (it doesn't even have to be about Scotland...) and you'll see a lot of hate for her - everything from claims that she's making a power grab for herself, to calling her one of the krankies. It's a sad state of affairs. Having said that, I think most people would agree she's one of the few British politicians delivering clear leadership at the moment, and for whatever reason, people don't seem to like that coming from her.

I've not heard much, if anything positive about May, but Davidson is generally highly regarded, even if very few actually vote for the Tories in Scotland.

Please note that the BBC is a UK-wide broadcaster, and takes comments from everyone — anecdotally, a lot of the anti-Sturgeon comments on twitter, reddit, etcetera[1] come from English nationalists. Scotland-bashing has never really gone out of fashion in England and there's been a marked upswing in its acceptability since the Brexit referendum[2].

[1] I avoid the BBC comments like the plague, for the same reason I avoid the Daily Mail.

[2] I was born and grew up in England; I've lived in Scotland for the past 22 years.

I believe the Tories size as opposition party was from an election before Brexit (and Trump obviously, this is also a referendum on him and his administration whether or not its explicit). Just how popular are Ruth Davidson and her party now?

They're doing better now as a party than before Brexit, but not for the reasons you might think.

The Labour party have traditionally been very strong in Scotland - the Labour party was a party for life, and many people only every voted Labour. However, this has all changed over the past year, as they have effectively self-imploded to the point of uselessness. I cannot overstate how much of a breakdown there has been within the Labour party, and people who had previously only ever voted Labour are now voting differently.

I'd argue that much of the Conservative party's gains have come from people who will simply no longer vote for Labour, rather than a move towards the Conservatives themselves.

Current thought within the SNP is moving towards building an economic case for independence which is not dependent on North Sea oil revenue. That reliance was seen as a weakness in the previous campaign, and there is awareness of that within the party.

Given that the cybernats have taken to denying GERS, despite those being the figures the last White Paper was based on - and the Common Weal proposed Scotland not having to pay pensions to balance the books, I wouldn't get your hopes up.

The clue is the quiet dropping of demands for Full Fiscal Autonomy over the past few years. There isn't close enough savings to made from things like Trident to enable even a credible deficit to be run. The level of spending cuts / tax rises required will be of the level that only an IMF intervention normally brings - far, far beyond anything Osborne did over many years.

'Cybernats' are not really representative of anything important, and I think it would be better to focus on the plans published going forward.

I'm an ardent supporter of independence, but I don't doubt for a second that it will be difficult to build a strong economic case – in no small part because of the level of uncertainty we are currently dealing with. But I'm quietly confident that the independence movement will have learned a lot from the previous campaign and will avoid making mistakes it perhaps made in 2014.

While I understand the truth that staying in the Pound is important to Scottish voters, I don't understand why. The Euro seems like a very close substitute to the Pound. They're both strong, largely un-inflated currencies that a sovereign Scotland will not control.

"currencies that a sovereign Scotland will not control"

And that's the key thing. They would be changing masters, probably for the worst.

As a former Euro supporter and now Euro sceptic I would recommend them to keep their lead in their own hand.

But that doesn't seem to be what they want. I agree about being skeptical of being a small, relatively powerless country in a currency union with a much larger economy, but that's the case for them regardless of whether they're on the Pound Sterling or the Euro.

That's my point. They can't do nothing about being a small country.

Their best option is have their own currency.

But my point is that they don't want their own currency. Also, the EU won't let them have their own currency. So given that that's off the table, the Euro is as good as the Pound for them.

it's a bit offtopic, but I'm curious why you changed your opinion and became euro sceptic. Could you explain ?

Sure, I started to read about economy, and I think I have now a good understanding about how the system works. That changed my mind.

It's my believe now that my country just give away a very important part of their sovereignty (maybe the most important) to entities that have not our best interest in mind. I would not be against the Euro if I though that the people in charge is on my side.

As an example (even if I'm not greek), we have seen the ECB just closing the Greece bank system when they are supposed to protect it.

For anyone interested, there are some discussion now about the legality of that movement: https://diem25.org/thegreekfiles/

>> While I understand the truth that staying in the Pound is important to Scottish voters, I don't understand why.

I've always heard the argument that things are more expensive in the Euro. I know people in countries where they switched to the Euro and salaries remained the same while prices of goods went up. I'm not sure why this happens (or even if it's true) but it's a reason a lot of people are against losing the pound.

My Grandma was saying this a lot. With some economic headwinds and constant (but not outsized) inflation comparing against a nostalgia currency that stopped inflating years ago, it's exceedingly easy to blame the Euro for making things more expensive.

Adopting it often makes central bank policy more challenging. An outright "Euro makes goods more expensive" statement is an oversimplification though, don't take it at face value and always ask for objective inflation data relating to the particular country in question.

It seems way more likely to have been the case in economies that were previously on a weak currency (like, say, Italy) than ones on a strong one (like, say, Scotland).

I'm presuming to the public the currency debate will be fought by politicians on more of an emotional level for example romanticising the Pound.

On the other side graphs of the Pound dropping in value after the referendum results is also quite powerful especially if the SNP frame it as leaving a sinking ship.

"The general feeling is that this vote will now succeed."

Polling for almost a year (see Wikipedia) indicates that it will not succeed - there's only one of more than a dozen or so polls that puts independence ahead - and then only by one point. 'Remain' are ahead by 10 points in the rest.

The easy trump card to play is the fact that Spain and others (Belgium) will not allow Scotland to join the EU, even if they do - it will take years.

An 'independent Scotland from an independent UK' is a huge pile of risk for people to stomach.

With the UK faring economically well since Brexit (I know A50 has not been triggered, but investors have already priced in what they know, and A50 is a sure thing) - this is not the 'Brexit horror' story the indyreffers wanted.

I would also point out that these things can fatigue on people, and that after a while, even soft Nationalists see the tactics of separatists.

The SNP said the last referendum was a "once in a lifetime" event - and that was 4 years ago. 'The situation has changed' - surely - but nevertheless, it makes them look rather without credibility on the surface of it.

It will be very interesting though.

Spains issue was that Scotland was separating from an existing member state, and that had implications for them. If the UK isnt part of the EU then the implications and objections are reduced.

The political ramifications are identical - it's not a technical issue.

Spain is desperately afraid of Catalonia departing - and the nuance of 'we left the EU before we joined' won't matter to the voters. Scottish separation and ascension to the EU would carve a crystal clear path for Catalonian separatists, and give massive wind to their sales.

To the above commenters point - no gov will likely ever come out and say it, but there's no reason for Spain to support Scottish ascension, and every reason to be against it.

> Spain and others (Belgium) will not allow Scotland to join the EU

It's very likely that Scotland won't remain a EU member (as a successor of a EU member), but no government has said they would veto Scotland's application. The media mentions about this topic are vaguely-worded, to make it sound like it's about Scotland ever becoming an EU member (which it's extremely likely to achieve) versus avoiding having to apply (which is probably not going to happen).

> The easy trump card to play is the fact that Spain and others (Belgium) will not allow Scotland to join the EU, even if they do - it will take years.

That argument played a lot better before the Brexit vote. The choice is now between "definitely out of Europe, possibly on bad terms" versus "hopefully rejoining Europe, possibly with interim deal".

Personally I expect Spain to accept an independent Scotland as leverage against Brexit Britain - note that this way Spain would retain the right to fish in Scottish waters. But all of these are "forward-looking statements".

Also the BBC asked a Spanish EPP representative directly if they would veto and he said no: http://www.bbc.co.uk/news/uk-scotland-scotland-politics-3923...

> UK faring economically well since Brexit

If a Labour government had lost 20% of the value of the £ along with threatening to expel financial services from London the news coverage would be rather different. I don't think it has all been priced in yet, because we don't know exactly how bad it's going to be.

http://www.telegraph.co.uk/business/2017/02/14/ftse-100-falt...

(Also, note that polls are from before campaigning starts! I'd expect campaigning to move the needle somewhat, otherwise what's the point?)

The UK isn't "threatening to expel financial services from London". That is some quite astonishing reality reversal.

The EU is threatening to legally force people to move to Europe from the UK if they want to continue selling services there. Neither the UK nor the financial services industry wants that, for obvious reasons. If it happens, it'll be the EU doing it, not a British government.

.. but the British government is the one triggering Brexit. It's a one-player game of chicken. The UK government has had plenty of options to say they want to try to retain financial passporting.

"Starting a chain of events which will likely lead to financial services having to move out of London", then.

I think it's a big change. The idea of Scotland leaving the UK was a non-starter when the UK was in the EU. The Spanish and other countries with separatist regions would never have allowed it. Now that the UK is leaving Europe (something the Scottish people did not vote to do), there is stll substantial risk in leaving the UK (which is a much bigger trading partner with Scotland than the EU) but also a great opportunity to attract all of the English companies with exposure to a hard Brexit - from financial services to manufacturing, this could be an awesome opportunity for Scotland should England push for a hard Brexit and be left trading on WTO rules with the applicable tarrifs.

With the UK faring economically well since Brexit

I think we'll need to wait and see on this one. A collapse in currency value has masked some of the longer-term issues that leaving the single market will raise.

but nevertheless, it makes them look rather without credibility on the surface of it.

I can't agree with this. The current Scottish government was elected with a manifesto indicating that a second referendum would held if Scotland was removed the EU.

> this is not the 'Brexit horror' story the indyreffers wanted.

I think its going to kill a lot of people when they see 'Brexit horror' not materializing. The UK has a powerful economy (number 5 in the world) and as such can certainly work out beneficial trade deals alone. Its not a Greece-like mess that benefits from the Euro and the Euro's backers. Without the shared currency and having a land border with other EU nations, its questionable if the benefits are worth it. At least, they come with liabilities.

I certainly see the various pro EU political argument at work here and many have validity, but the economic one is fairly weak sauce. If anything, the UK has a stronger negotiation position as its own entity, assuming they play their cards right. If Scotland wants to go independent then fine, but using brexit as an excuse is very questionable.

>even soft Nationalists see the tactics of separatists.

I wonder how many separatists are being honeydicked by Russia. Russia has been funding separatists and far-right political parties in the West for its own gain for quite some time now. Perhaps people are starting to see through their ultra-tailored Facbook newsfeed, hysterical yellow journalism, legitimately fake news, and other biased media. I suspect the Trump win the US is showing people that yes, an electorate can go crazy with outsiders and extremist policies, but that doesn't mean that's actually good for the electorate.

Ignoring Spain's own separatist fears, the EU members probably are fairly wary of any separatist talk right now, especially after seeing what happened in Crimea, and don't want to encourage it and certainly don't want to signal that separatism is a quick way to EU membership. Not to mention NATO membership, are the Scots ready to invest 2% of their GDP into defense (nearby $4bn)? We've probably moved towards an anti-separatist attitude in the West for the foreseeable future due to recent events. According to the guardian, the yes/no spread is the same was it was in 2014, so the idea that Scotland has become more separatist is questionable:

Between August and December last year we polled over 3,000 Scottish adults and found yes to Scottish independence on 46% and no on 54% – just a fraction different from the result two years earlier.

https://www.theguardian.com/commentisfree/2017/jan/27/shift-...

> UK has a powerful economy (number 5 in the world)

Not 5th any more:

http://www.dailymail.co.uk/news/article-4056296/India-overta...

(yes the mail is unreliable but I thought I'd pick the most Brexity source)

Looks like India's recent growth have edged them out, but I just want to point out that's why, not because the UK is falling. Its just India is, finally, catching up to the rest of the world. This is good news for India and doesn't take away from the UK. Also, remember we're talking about an economy of merely 65m people that chimes in at 6th.

UK GDP growth fits in at almost 2% which is where the USA sits at as well and typical of later-stage capitalist countries. EU darling and once economic powerhouse France is at .3%. Spain is only recently getting out of negative growth, for comparison.

UK GDP growth is almost entirely due to financial services and legal sectors in London, who just received the official notification that London is no longer the banking center of Europe.

Yet somehow everytime I see these fairly dramatic predictions about the US losing its petrodollar and the dollar collapsing or banking moving to $other_country, $cryptocurrency, etc or everyone switching to the Yuan or Ruble, etc they are almost always wrong.

I think you're dismissing how powerful inertia is in the financial sector and how the EU needs the UK and as such will work out agreements to keep things going. London wealth and banking is most likely very safe. Remember, London as the premier financial center of Europe predates the EU by a few hundred years. It is not an outgrowth of EU membership.

London is still the banking center of Europe. Trade cuts both ways too: the EU needs the companies and people based in London. Cutting themselves off from their own financial center won't be pain free.

However, I think it's now almost certain that if Scotland does vote to become independent they will be forced to take the Euro as currency.

Is Spain now willing to allow them into the EU or will they veto their membership application because of their issues with Catalonia?

Still seems like racist SNP are still in denial

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