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Scottish independence: Bank of England governor Mark Carney enters debate Scottish independence: Bank of England boss Mark Carney on currency plan
(35 minutes later)
The Bank of England governor will enter the Scottish independence debate by reflecting on the currency implications of a "yes" vote in the referendum. The Bank of England governor has said plans to share the pound between an independent Scotland and the rest of the UK needed "careful consideration".
Mark Carney's speech in Edinburgh comes amid continuing speculation over the Scottish government's plan to keep the pound under independence. Mark Carney said a currency union agreement, as proposed by the Scottish government, would require proper foundations to be put in place.
SNP ministers would also want to retain services of the Bank of England as part of a currency union. He argued the risks of not doing so had been demonstrated by problems in the Eurozone.
The UK government has said such an agreement would be "unlikely". Mr Carney's comments came ahead of the Scottish independence referendum.
Downing Street believed the issue around currency was "an important part of the debate that is currently going on in Scotland". On 18 September, voters in Scotland will be asked the yes/no question: "Should Scotland be an independent country?"
A spokesman for Prime Minister David Cameron said that it was of no "great surprise" that on technical issues the governor of the Bank of England would want to set out his views. In the event of a "Yes" vote, the Scottish government has said keeping the pound and retaining the services of the Bank of England, under a formal currency union agreement, was the best option for Scotland and the rest of the UK.
Mr Carney's visit comes ahead of the 18 September independence referendum, in which voters will be asked the yes/no question: "Should Scotland be an independent country?" The UK government has said such an agreement would be "unlikely", and the deal would result in Scotland effectively having to hand over control of interest rates and borrowing levels to a foreign country.
Ahead of being a guest at an event hosted by the Scottish Council for Development and Industry, the governor met Scottish First Minister Alex Salmond. Speaking in Edinburgh, Mr Carney stressed arrangements for a currency union in the event of independence would be a matter for the Scottish and UK parliaments.
After the breakfast meeting, Mr Salmond said Mr Carney had agreed to continue "technical" discussions on a possible sterling zone if Scotland became independent. He added: "If such deliberations ever were to happen, they would need to consider carefully what the economics of currency unions suggest are the necessary foundations for a durable union, particularly given the clear risks if these foundations are not in place.
The first minister added: "The Bank of England is an independent institution. It doesn't take a role in party politics but we had a splendid discussion and I think crucially have agreed to continue the technical discussions, not negotiations but the technical discussions, that the Bank of England has been having with the Scottish government so that our proposals are soundly based on technical terms. "Those risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance."
"When the governor speaks we will hear what he has to say. He will be giving a technocratic assessment of the institutional arrangements necessary to make a currency union work. He won't be advocating it or arguing against it. That is a matter for the Scottish people. Mr Carney, who was speaking at an event hosted by the Scottish Council for Development and Industry, went on: "The euro area is now beginning to rectify its institutional shortcomings, but further, very significant steps must be taken to expand the sharing of risks and pooling of fiscal resources.
"He won't be saying whether Scotland will be better off or worse off as an independent country. That is a matter for the Scottish people to decide." "In short, a durable, successful currency union requires some ceding of national sovereignty.
Borrowing levels "It is likely that similar institutional arrangements would be necessary to support a monetary union between an independent Scotland and the rest of the UK."
'Popular' proposition
Earlier, Mr Carney, who has agreed to provide "technical" analysis of the issues ahead of the referendum, met privately with Scottish First Minister Alex Salmond.
Following the meeting, Mr Salmond said: "The Bank of England is an independent institution.
"It doesn't take a role in party politics but we had a splendid discussion and I think crucially have agreed to continue the technical discussions, not negotiations but the technical discussions, that the Bank of England has been having with the Scottish government so that our proposals are soundly based on technical terms."
Mr Salmond said he was confident UK ministers would agree to a currency union in the event of Scotland voting for independence.Mr Salmond said he was confident UK ministers would agree to a currency union in the event of Scotland voting for independence.
He added: "They will agree for two reasons. It is overwhelmingly in the interests not just of Scotland but of the rest of the UK to have Scotland and England sharing the pound.He added: "They will agree for two reasons. It is overwhelmingly in the interests not just of Scotland but of the rest of the UK to have Scotland and England sharing the pound.
"Secondly, of course, they will be driven there by the people because that proposition is popular both in Scotland and in England at the present moment."Secondly, of course, they will be driven there by the people because that proposition is popular both in Scotland and in England at the present moment.
"So the UK government ministers will do what the people tell them to do, and that is Scotland will keep the pound and England wants us to keep the pound.""So the UK government ministers will do what the people tell them to do, and that is Scotland will keep the pound and England wants us to keep the pound."
In its White Paper blueprint for independence, the Scottish government said a currency union agreement was vital in letting companies go about their business, while sterling would also benefit from Scotland's continued involvement because of assets such as North Sea oil and gas. Technical issues
But UK ministers have said such a deal would result in Scotland effectively having to hand over control of interest rates and borrowing levels to a foreign country. A spokesman for Prime Minister David Cameron said that it was of no "great surprise" that on technical issues the governor of the Bank of England would want to set out his views.
Mr Carney, who has agreed to provide "technical, objective, dry analysis" of the issues ahead of the referendum, told the BBC last week: "There are issues with respect to currency unions. We've seen them in Europe. He explained: "The issue around currency is an important part of the debate that is currently going on in Scotland. It hardly seems a great surprise at all, on the technical issues, that the governor of the Bank of England might want to set out his views.
"It's one of the factors that affects, actually, the outlook for the UK economy, has affected us over the last five years, affects us going forward, the challenges of having a currency union without certain institutional structures." "I'm sure the people of Scotland will want to be as well-informed as possible."
The event in Edinburgh comes the day after Mr Salmond said he was told by Mr Carney's predecessor - Sir Mervyn King - that the Treasury would adopt an "entirely different" approach to Scottish issues if there was a "Yes" vote in the referendum.
'Remarkable coincidence'
Ahead of discussions with the Bank of England governor, the first minister said: "When I met his predecessor a couple of years back, Mervyn King, the first thing he said to me was 'your problem is what they say now', meaning the Treasury, 'and what they say the day after a Yes vote in the referendum are two entirely different things'."
Responding to Mr Salmond's comments, a spokesman for the official campaign to keep the Union, Better Together, said it was a "remarkable coincidence" that Sir Mervyn's reported remarks backed up the Scottish government's position.
A spokesman said: "The first minister operates on the basis that people are daft and can't see through his bluster.
"Unfortunately for him, people know when someone is at it."