Currency

Would an independent Scotland have to use the Euro?

Stephen Richard — Thu, 04 Nov 2021 17:57:20 +0000

Would an independent Scotland have to use the Euro?

Primary Author or Creator

Believe in Scotland

Stephen Richard Thu, 11/04/2021 - 17:57

Category

Currency

Fast Facts

‘No. Scotland would not have to necessarily use the Euro.’

More details

It’s a regular question and relates to EU rules that are largely misunderstood, whether an independent Scotland would have to necessarily use the Euro as its currency. We say that the question is more about whether an independent Scotland would decide to adopt the Euro or not? We researched the facts and we found the following:

The Truth

The short answer is, ‘no Scotland would not have to necessarily use the Euro.’ In fact, if an independent Scotland decides to join the EU as a full member, then according to the process for joining as a new member, Scotland would have to commit to using the euro at some undefined point in the future.

The Facts

The Scottish Government’s current policy is to be an EU member.
It is technically impossible to join the euro if you do not have your own currency. Joining the euro involves joining the European Exchange Rate Mechanism and without a sovereign currency, you can’t do that.
In principle, all Member States that do not have an opt-out clause (i.e. the United Kingdom and Denmark) have committed to adopting the euro once they fulfil the necessary conditions. However, it is up to individual countries to calibrate their path towards the euro and no timetable is prescribed.
The Member States that joined the EU in 2004, 2007 and 2013, after the euro was launched, did not meet the conditions for entry to the euro area at the time of their accession. Therefore, their Treaties of Accession allow them time to make the necessary adjustments.
It is highly likely that an independent Scotland would continue to use the sterling as its currency, at least during a transitional period.
To use the euro you have to meet the necessary conditions set by the EU and Scotland doesn’t, not least because it neither has nor plans to launch its own sovereign currency immediately after becoming independent.
Scotland would be empowered by the EU to decide the timetable to meet the conditions and as quoted, no timetable is prescribed; Scotland could be on an indefinite path to adoption. There are several nations to whom this process already applies and the EU told them they did not qualify to use the euro; such as Bulgaria, Croatia, Czechia, Hungary, Poland, and Romania.

Conclusions

An independent Scotland does not need to use the euro as its currency under all circumstances.

Due to the use of sterling in the transition period, it is possible for Scotland to join the European Free Trade Association (EFTA), which includes Norway, Iceland, Switzerland and Liechtenstein, to have to access the single market and customs union. EFTA members are not required to join the euro, but they can if they wish to become full members of the EU.
If independent Scotland joins the EU as a full member state the EU will agree that it is not possible for Scotland to adopt the euro and will give the Scottish Government full control over the timescales to meet the criteria. The Scottish Government can therefore indefinitely avoid joining the euro. However, a future Scottish Government might decide to join the euro voluntarily.

Keywords

Language English

New Money; Central Bank Digital Currencies

Stephen Richard — Sun, 10 Oct 2021 17:39:21 +0000

New Money; Central Bank Digital Currencies

Primary Author or Creator

Peter Ryan

Stephen Richard Sun, 10/10/2021 - 18:39

Additional Author(s) / Creators

Common Weal

Alternative Published Date

2021

Category

Currency

Type of Resource

Podcast

Length (Pages, words, minutes etc...)

32 minutes

Fast Facts

Craig speaks to Peter Ryan – expert on currency and banking systems and author of several papers for Common Weal and the Scottish Independence Convention - on currency in an independent Scotland.

More details

The Common Weal Policy Podcast – Episode #101

Resource Address (URL)

https://commonweal.scot/podcast/the-common-weal-policy-podcast-episode-101/

Keywords

Digital currencies

Language English

The SNP must rethink its economic model for an independent Scotland

Stephen Richard — Wed, 06 Oct 2021 08:45:14 +0000

The SNP must rethink its economic model for an independent Scotland

Primary Author or Creator

Laurie Macfarlane

Stephen Richard Wed, 10/06/2021 - 09:45

Additional Author(s) / Creators

Open Democracy

Date Published

Tue, 10/27/2020 - 12:00

Category

Economy

Currency

Type of Resource

Assessment report

Fast Facts

A critique of the Growth Commission's report. "Far from being an asset to the independence cause, the Growth Commission is its biggest liability. It’s time, as we say, ‘tae think again’."

Resource Address (URL)

https://www.opendemocracy.net/en/oureconomy/snp-must-rethink-its-economic-model…

Keywords

Language English

TRANSITION TO A SCOTTISH CURRENCY

Stephen Richard — Fri, 01 Oct 2021 22:18:02 +0000

TRANSITION TO A SCOTTISH CURRENCY

Primary Author or Creator

Peter Ryan

Stephen Richard Fri, 10/01/2021 - 23:18

Additional Author(s) / Creators

Scottish Independence Convention

Alternative Published Date

2020

Category

Currency

Type of Resource

Policy Paper

Length (Pages, words, minutes etc...)

12pp

Fast Facts

The decision on Scottish independence is a decision for the people of Scotland. When making that decision it should be clear which currency an independent Scotland would use. If the people of Scotland vote for an independent Scotland with its own currency, that democratic mandate should be respected.

More details

Scottish Independence Convention (SIC) Transition Paper No. 6 Currency

Resource Address (URL)

https://independenceconvention.scot/transitions

Keywords

Money

Modern Monetary Theory

Scottish Central Bank

Language English

Would an independent Scotland have to keep the pound and cut public spending?

Stephen Richard — Tue, 28 Sep 2021 19:37:39 +0000

Would an independent Scotland have to keep the pound and cut public spending?

Primary Author or Creator

Joël Reland

Stephen Richard Tue, 09/28/2021 - 20:37

Additional Author(s) / Creators

Full fact

Date Published

Fri, 06/01/2018 - 12:00

Category

Currency

Public Finance

Type of Resource

Fact check

Fast Facts

A report suggests an independent Scotland would have to make public expenditure reduction. he report actually says that public spending could continue to grow. This does depend on sufficient growth in the economy after independence.

Resource Address (URL)

https://fullfact.org/economy/would-independent-scotland-have-keep-pound-cut-pub…

Keywords

Currency

Austerity

Language English

Scottish Currency Group

Stephen Richard — Thu, 16 Sep 2021 12:08:25 +0000

Scottish Currency Group

Primary Author or Creator

Tim Rideout

Stephen Richard Thu, 09/16/2021 - 13:08

Category

Currency

Type of Resource

Facebook group

Fast Facts

People working towards the introduction of a Scottish Currency 'as soon as practicable' after Independence Day. A Facebook group.

Resource Address (URL)

https://www.facebook.com/groups/scottishcurrency/

Keywords

Currency

Scottish currency

Language English

SCOTTISH RESERVE BANK

Stephen Richard — Thu, 16 Sep 2021 11:59:38 +0000

SCOTTISH RESERVE BANK

Primary Author or Creator

Tim Rideout

Stephen Richard Thu, 09/16/2021 - 12:59

Category

Banking

Currency

Type of Resource

Blog

Fast Facts

The Scottish Reserve Bank website attempts to clear up many of the deliberate myths surrounding the establishment of a new Scottish currency

Resource Address (URL)

https://www.reservebank.scot/blog#gsc.tab=0

Keywords

Scottish economy

Currency

Scottish Reserve Bank

Scottish National Bank

Language English

How to make a Currency: A Practical Guide

Stephen Richard — Sun, 12 Sep 2021 20:02:57 +0000

How to make a Currency: A Practical Guide

Primary Author or Creator

Peter Ryan

Stephen Richard Sun, 09/12/2021 - 21:02

Additional Author(s) / Creators

Common Weal

Alternative Published Date

2016?

Category

Currency

Type of Resource

Policy Paper

Fast Facts

Launching a new currency in the modern digital age is complex – it is a process with a lot of moving parts – but it is not impossibly difficult.

This paper lays out a three year timetable starting from shortly after a Scottish independence referendum and culminating in the launch of a new currency on Independence Day.

The blueprint is informed by existing precedents including the launch of the euro and comprises the most detailed and authoritative paper yet produced on how to introduce a Scottish currency in the event of independence.

More details

A three year transition period after independence will be necessary to introduce a new Scottish Currency. An electronic currency will be introduced first, pegged 1:1 with Sterling over the whole of the transition, before introducing a physical Scottish Currency
near the end of the transition period.

Allow individuals to convert bank accounts from Sterling to Scottish Pound across the transition period. Agreement shall be sought so that cross currency transaction costs shall not be charged during the transition period.

A domestic and international payment infrastructure will need to be established. There is the potential to establish a Scottish Government owned centralised system for this.

It will take just two years for the Scottish Central Bank to be turning a profit through seigniorage, based on an initial investment of £50m in starting up the currency.

An equivalence between the new Scottish Currency and Sterling over the transition period will ensure prices initially stay the same.

Existing contracts and mortgages will be able to continue on their existing terms but it will also be possible to convert or redenominate these to the new Scottish currency. The Scottish government should set up systems to aid these conversions.

The payment of taxes and the receiving of welfare payments should be introduced as early as possible into the life of the new currency.

The Scottish Government would have to decide to whether to redenominate the debt into the new Scottish Currency or alternatively keep the debt in Sterling and make the repayments in Sterling.

At the start of the transition period, a working group would oversee the introduction of the new Scottish Currency, before a Scottish Central Bank takes over when the physical currency is introduced.

Resource Address (URL)

https://commonweal.scot/policies/how-to-make-a-currency-a-practical-guide/

Keywords

Currency

Independence transition

Language English

Backing Scotland’s Currency – Foreign Exchange Reserves for an Independent Scotland

Stephen Richard — Mon, 06 Sep 2021 21:35:21 +0000

Backing Scotland’s Currency – Foreign Exchange Reserves for an Independent Scotland

Primary Author or Creator

Peter Ryan

Stephen Richard Mon, 09/06/2021 - 22:35

Date Published

Mon, 06/12/2017 - 12:00

Category

Currency

Type of Resource

Policy Paper

Fast Facts

Examining how an independent Scotland could back and defend a Scottish currency.

More details

― The size of a country’s foreign reserves are very much dependant on the policy and history of a country and there is a substantial spread of holdings across countries ranging within the European Union from 5.69% of GDP in the UK, through 11.96% in Sweden, up to more than 40% of GDP for countries like Bulgaria or the Czech Republic.

― For the purposes of this paper, a more typical sum of 20% of GDP shall be demonstrated, which for Scotland is approximately $40 billion (approximately the same value of foreign exchange reserves as Denmark).

― $16.2 billion may be secured through a reasonable division of the UK’s foreign exchange reserves under a debt and asset negotiation.

― £4.462 billion worth of hard Sterling currency is in circulation within Scotland. If half of this is converted into the new Scottish currency and the Sterling held by the Scottish Central Bank, $2.9 billion may be raised for the foreign reserve. An equivalence between the new Scottish Currency and Sterling over the transition period will ensure prices initially stay the same.

― $13 billion would be raised via a foreign exchange swap with the Bank of England to aid the mutual stability of both the economies of Scotland and the rest of the UK.

― €8 billion Euros ($8.8 billion) will be raised via the issue of a Euro bond. Funds raised will be partially converted into other reserve currencies such as Yen and Renmimbi.

― In total, $40.23 billion can be feasibly raised to support an independent Scottish currency.

― The costs of servicing the debt accrued by Scotland for these reserves (approximately £70.2 million per year) will be substantially less than the current annual contribution by Scotland to the UK’s foreign reserves (£500 million per year) which are being built up by the UK government to bail out the City of London in the event of another crash.

― Several scenarios are outlined regarding the ownership of currently nationalised banks such as RBS. Assuming sufficiently regulatory oversight in no case could it be expected that Scotland would bear the full burden of banking losses incurred outside of Scotland

Resource Address (URL)

https://commonweal.scot/wp-content/uploads/2017/06/Backing-Scotlands-Currency.p…

Keywords

Currency

Foreign Currency Reserves

Bank ownership

Language English

A Silver Chain – A Critique of the Sustainable Growth Commission’s Monetary Policy Recommendations

Stephen Richard — Sun, 05 Sep 2021 09:17:12 +0000

A Silver Chain – A Critique of the Sustainable Growth Commission’s Monetary Policy Recommendations

Primary Author or Creator

Craig Dalzell

Stephen Richard Sun, 09/05/2021 - 10:17

Alternative Published Date

June 2018

Category

Currency

Fast Facts

On the 25th May 2018, after more than 18 months of preparation, the SNP-commissioned Sustainable Growth Commission made its final report – entitled Scotland – The New Case For Optimism – which has been presented as a series of recommendations on which could rest the economic, fiscal and monetary case for Scottish independence in a future referendum campaign. This document does not cover the full gamut of policies which would be directly affected by independence nor does it cover the full range of institution building required by a nascent independent state. Whilst the report discusses the creation of a “Central Bank” and associated regulatory body the discussion about the creation of other institutions such as energy regulators, customs and borders agencies and foreign and diplomatic services lay outwith its remit.

More details

― The Growth Commission report represents the first major work produced by the SNP on the topic of economy, currency and independence since the 2014 Scotland’s Future White Paper.

― Departing from the party’s position in 2014, the Growth Commission report drops the proposal of a formal currency union with the remaining UK (rUK) in favour of unofficially maintaining the Pound Sterling as the currency of an independent Scotland – this process is known as Sterlingisation.

― This paper highlights the severe shortcomings of this policy, notably the barriers raised by it towards launching an independent currency in the future – despite this being the stated aim of the report.

― In particular, the “six tests” laid out as a condition to transition to an independent currency appear to be actively designed to be impossible to meet. Several in particular appear to act to harmonise Scotland’s economy with that of the rUK and will make it difficult to actively diverge from policy decisions that will be made, then, by a foreign government without the input of Scottish politicians.

― Common Weal believes that the most “future neutral” approach to currency and independence (i.e. the option that leaves Scotland with the widest possible framework of policy options outwith currency) is to prepare to launch an independent Scottish currency so that it is fully operational by day one of independence.

Resource Address (URL)

https://commonweal.scot/wp-content/uploads/2018/05/A-Silver-Chain.pdf

Keywords

Growth Commission

Currency

Sterlingisation

Language English