The argument over the currency for an independent Scotland used to be so simple. Back in the pre-crash days, when the euro was solid and Ireland – Scotland’s then-independent model of choice – was doing well, the picture seemed straightforward.
SNP policy was clear: keep the pound until a referendum on the euro could be organised, then support a push for Scotland to join the European single currency.
Senior nationalists knew that this wasn’t just a discussion over currency, it was a debate about the direction an independent Scotland would face. Would it be pro-European, outward-looking and independent within Europe – or would it still be tied to the old state of the United Kingdom, symbolically hitched to the apron strings of the Old Lady of Threadneedle Street?
They knew that the pound was seen as institutionally British and there was a sense that Scotland couldn’t really be independent if it was still using a currency based in the Bank of England.
But with the problems afflicting the euro, this once so straightforward argument has become a lot more complicated. Indeed, with Scottish ministers preparing the groundwork for an independence referendum, the issue of currency is now proving to be one of the most difficult areas of all to resolve.
The pull of sterling has never been stronger. Given the weaknesses of the euro and the problems with the dollar, the pound is gaining supporters internationally on a daily basis.
But the euro still has its backers among Scottish nationalists. Indeed, there are many in the SNP who still believe in Scottish membership of the euro and who maintain – with some foundation – that the euro will not only survive but will come back stronger and more stable when the problems with Greece, Spain, Portugal, Ireland and Italy have been resolved.
But they also know that Scottish membership of the euro is a hard sell. Indeed, it is probably true that it has never been harder to sell the idea of Scottish membership of the euro to a sceptical Scottish population.
It was into this context that Alyn Smith, an SNP MEP, stepped when he suggested in the Times this week that Scotland could have its own, new currency, pegged to the euro.
“We could be like Denmark and have an independent currency in the EU,” he said.
Mr Smith is one of the SNP’s most original thinkers and, deep down, there may be considerable merit in his suggestion. However, with the euro struggling, the idea of creating a new currency and pegging it to the beleaguered euro generated immediate hostility and even ridicule.
Labour claimed that Scottish families would have to pay an average of £125 on their mortgages if Scotland joined the euro.
And David Martin, a Scottish Labour MEP, said: “The SNP’s position on the euro is in meltdown. Some are for it, some are against it, and today we have this left field idea from a senior nationalist for an entirely separate Scottish currency. It is hard to keep up; the SNP’s policy seems to change by the minute. The SNP needs to make up their mind on a clear policy and stop selling a false perspective.”
The problems with the euro have pushed some former enthusiasts of economic and monetary union to the other side. Some who supported British membership of the euro in the past have either gone silent or have switched to the pound.
That’s fine for Labour, Lib Dem or Conservative politicians, but it’s not so easy for the SNP. The nationalists have to come up with a clear idea for the currency in an independent Scotland and, as yet, they haven’t done so.
It is a very difficult situation. Do they back the euro which has tottered on the edge of a full-blown credibility crisis for the last few months and may suffer at least a partial collapse if it loses Greece as one of its members?
Do they back the pound and the implicit message that an independent Scotland will not really enjoy fiscal and monetary freedom?
Or do they go for the Alyn Smith option: a new, Scottish currency pegged to the euro, but some way short of full economic and monetary union?
A few years ago, it was hard to stop SNP politicians talking about the euro, but it is now difficult to find one who is willing to utter even a few words on Scotland’s prospects of joining the single currency.
This is a major problem as they try to draw up the blueprint for an independent Scotland, and they know it.
There are many reasons why Alex Salmond wants to put off the referendum on independence until the latter part of this parliament, but one of them is undoubtedly confusion over currency.
Mr Salmond would like to be able to endorse the euro for an independent Scotland but he can’t – at least not yet.
He, and other senior figures in the SNP, will be hoping that the future of the euro looks a great deal more secure in three or four years' time than it does now. It might well do. If that is the case, then Scotland’s potential membership of the euro will be back on the table.
But if it doesn’t, the choice will remain extremely difficult with none of the available options really palatable for many Scottish nationalists.
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