The U.K. can’t prevent an independent Scotland from keeping the pound, and a formal currency union would be an “excellent arrangement,” Nobel prize-winning economist James Mirrlees said.
Speaking in a Bloomberg Television interview today in Lindau, Germany, he said the risks associated with sharing the pound were overblown. Mirrlees, a Scot, is a member of a panel advising Scotland’s nationalist government on the finances of independence. The group, which also includes Joseph Stiglitz, recommended Scotland seeks to retain the pound.
“You don’t want to see two economies coming apart in any way because they are so inter-linked,” said Mirrlees. “Scotland is continuing to use sterling even if it’s not in a union. Suppose there were difficulties over the negotiations, there’s nothing to stop Scotland using sterling.”
Scottish residents will vote in an independence referendum four weeks from today. The pound has taken center stage during the campaign, with the three main U.K. political parties all saying they would refuse to grant a currency union.
Fellow Nobel laureate Stiglitz said yesterday the U.K.’s stance was a bargaining chip and will be dropped should voters back independence. Polls suggest Scots will reject going it alone, though the gap isn’t wide enough to rule out a Yes vote.
An ICM poll for the Scotland on Sunday newspaper on Aug. 17 put the gap at 10 percentage points. Excluding undecided voters, Yes support climbed two points to 45 percent and No dropped two points to 55 percent. A separate poll commissioned by the Yes side put the gap at four percentage points.
Scottish First Minister Alex Salmond came under fire from anti-independence campaign head Alistair Darling in a live televised debate on Aug. 5 for saying there was no need to come up with an alternative plan to retaining the pound. A second head-to-head, to be broadcast U.K.-wide on the BBC, is scheduled for Aug. 25.
“There are some risks but the discussion has exaggerated the size of them,” said Mirrlees. “I really expected the Westminster parties to be quite happy to accept a sterling union as an excellent arrangement.”