Fitch warns of ‘uncertainty’ over SNP plans for currency union

The credit ratings agency Fitch has warned of instability if an independent Scotland were to remain part of a currency union with the UK.

The credit ratings agency Fitch has warned of instability if an independent Scotland were to remain part of a currency union with the UK.

Drawing on experiences within the Eurozone, the agency concludes that without a shared fiscal and banking union to match a currency union, it could risk “high volatility and market turbulence” across Scotland and the rest of the union.

In a news report Fitch expands:

“The monetary arrangement following Scottish independence could become a source of uncertainty even if Scotland remained in the sterling currency zone.

“As the intensification of the eurozone crisis showed in 2012, a monetary union without fiscal and banking union is unstable and the prospect of an exit from a monetary union could lead to high volatility and market turbulence, potentially detrimental to all members.”

Responding to the report, a spokesperson for finance secretary John Swinney has rejected its conclusions, arguing that comparisons between a currency union proposed by the SNP and the euro are not possible. The spokesperson explained:

“Comparisons with the eurozone are wrong because the Scottish and rest of the UK economies are well-matched with almost identical levels of productivity, unlike the disparate economies of the euro area.

“A shared currency within a common sterling area has been backed by the expert work of the Fiscal Commission, including its two Nobel laureates, by many leading business figures and academics, and by currency experts at Deutsche Bank and Citigroup.

“Sharing the pound will also be in the overwhelming interests of the rest of the UK, and has been described by No campaign leader Alistair Darling as ‘logical’ and ‘desirable’.”

Dubbing it “another blow to Salmond’s credibility”, the former chancellor and head of the Better Together campaign Alistair Darling commented:

“This report is another blow to Salmond’s credibility on the central issue of what currency Scotland would use after leaving the UK.

“It is increasingly obvious that the idea of a currency union is dead in the water. To be successful, a currency union requires fiscal and political union – the very thing the SNP are campaigning to dismantle in the United Kingdom.”

The Fitch report comes on the back of the shadow chancellor Ed Balls declaring plans for a currency union to be “flawed”, the chancellor, George Osborne  arguing that such a proposition is “unlikely”; whilst the Welsh first minister Carwyn Jones has committed himself to vetoing a sterling union with an independent Scotland.

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