Mark Carney: Independent Scotland currency union '˜economically possible'

A currency union between an independent Scotland and the rest of the UK is economically possible, the Governor of the Bank of England has said, but warned that it would require continued deep integration to function.

By The Newsroom Tuesday, 22nd May 2018, 6:15 pm Updated Tuesday, 22nd May 2018, 7:26 pm

Mark Carney said there were "political ramifications" to the kind of sharing of economic sovereignty that he said would be "highly desirable for an effective currency union".

But he said it was for "others to judge" whether it was if a political union was essential for Scotland to continue using the pound, in comments that some pro-independence campaigners will claim as a softening of the Bank of England's stance on a currency union.

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It comes as a Growth Commission established by the SNP prepares to publish a long-awaited report on the economy of an independent Scotland, which is expected to recommend a separate currency following a transition away from the pound.

The currency of an Independent Scotland was an issue of fierce debate in the 2014 referendum. Picture: AP/TSPL

At the time, Mr Carney also said that a currency union would be "incompatible with sovereignty".

But giving evidence to the Commons Treasury Select Committee, suggested a currency union could work even Scotland separated from the UK politically.

"There are a number of requirements for an effective currency union, and they include an element of fiscal union," Mr Carney said. "I think that’s pretty widely accepted.

"It’s clear that there are different ways to construct that. It also includes having a form of financial market union, banking union and capital market union, all the components that the European monetary union is still trying to fully construct.

"I think the best way I can frame it is to quote the president of the European Central Bank, who has said repeatedly that the European monetary union is unfinished business because some of the elements are there, but not all the of the elements are there."

Pressed on whether a political union was necessary, effectively ruling out an independent Scotland from sharing the pound, Mr Carney replied: "From an economic perspective, it’s not necessary.

"The question is from a political perspective if you have this sort of shared economic sovereignty, you require a political union, but there are lots of other determinants of whether you have a political union that others can judge."