Would Scotland really qualify for Standard & Poor's "highest economic assessment"?
This morning the Yes to Scottish independent campaign sent an interesting tweet into cyberspace. Indeed, if you happen to be a supporter of Scottish independence the offending tweet probably warmed the cockles of your heart.
“An independent Scotland could have a healthier credit rating than the UK,” Yes Scotland proclaimed.
This mirrors a claim made by Iain Macwhirter in The Herald at the weekend:
“According to one of the world’s biggest rating agencies, an independent Scotland might have a AAA credit rating even without taking the oil into account,” Macwhirter wrote.
“Standard & Poor’s reported on Thursday that an independent Scotland would ‘qualify for our highest economic assessment’. Its analysts looked at Scottish economic fundamentals like on-shore GDP and concluded that an independent Scotland would be up there with triple A-rated countries such as Germany,” he added.
And indeed, Standard & Poor’s did say that Scotland would face “significant, but not unsurpassable” challenges if it went it alone.
But would it really qualify for Standard & Poor’s “highest economic assessment” and “be up there with triple A-rated countries such as Germany”?
Not according to the report which the Yes campaign have very selectively quoted from.
A closer look at the report in question finds that Scotland would struggle to match the UK’s AAA credit rating unless it managed to negotiate a currency union with London or the eurozone – something ruled out by the three leaders of the main political parties.
The Standard & Poor report actually says the following:
“Our ‘AAA’ rating on the UK is supported by the country’s power to issue a global reserve currency and the depth of its local capital markets, denominated in this currency.”
It adds that:
“the absence of access to liquidity support from the Bank of England or the ECB…would leave investors more reluctant to lend to Scotland’s banks in a new currency that may not benefit initially from deep capital markets”.
So in sum, there is very little reason to think an independent Scotland would be assured a AAA credit rating, despite the SNP/Yes campaign bluster.
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