UPDATE 1-Scottish nationalist leader faces opposition criticism over sterling

Thu Aug 7, 2014 2:10pm EDT

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By Alistair Smout

EDINBURGH Aug 7 (Reuters) - An independent Scotland cannot be stopped from using sterling even if London refuses a formal currency union, nationalist leader Alex Salmond said on Thursday, just two days after he failed to win a televised debate dominated by the issue.

The future currency of an independent Scotland remains one of the major issues in the campaign just six weeks before Scots decide in a Sept. 18 referendum whether to break their 307-year union with England.

After a television debate in which Salmond was peppered with questions by unionist Alistair Darling about his "Plan B" for the currency given London's opposition to any currency union, Salmond was again quizzed on Thursday about his plans.

At a question-and-answer session in the Scottish parliament, Scottish Labour Party leader Johann Lamont repeatedly asked Salmond: "What is your Plan B?"

"It's Scotland's pound and we're keeping it," Salmond said at the session, known as First Minister's Questions.

"We cannot be stopped from keeping the pound because it is an internationally traded currency."

British ministers have repeatedly ruled out a currency union. Finance minister George Osborne told Scots in February that the pound was not like a CD collection which could be split up when a couple separated.

In Tuesday's television debate, unionist campaign leader Darling said Salmond was basically proposing using sterling like Panama or Ecuador used the dollar.

Opinion polls show Scots are likely to reject independence, though up to 1 million Scots are still undecided.

STERLING UNION?

Salmond, who studied economics and history at university before working as an economist at the Royal Bank of Scotland, said an independent Scotland would have the option of using the euro but that he did not support that.

He said Britain would end its opposition to a currency union if Scots voted for independence because otherwise Scotland could refuse to take on its share of the United Kingdom's 1.3 trillion pounds ($2.2 trillion) worth of government debt.

"If you keep all of the assets of the United Kingdom, you end up keeping all of the liabilities of the United Kingdom," Salmond told Scottish lawmakers.

In an attempt to reassure bondholders, the UK Treasury in January promised to honour all UK government debt regardless of whether Scotland votes for independence.

Chancellor of the Exchequer Osborne has said that bond investors would demand an independent Scotland pay punitively high interest rates to borrow if it was reckless enough to default on its liabilities.

The debate over sterling in the Scottish parliament came as Salmond faced criticism by local media for flunking the first U.S.-style television debate of the campaign.

The Daily Record, Scotland's second most popular newspaper, said some Scottish National Party (SNP) lawmakers unhappy with Salmond's performance had pushed for his deputy, Nicola Sturgeon, to be put forward in any future such debates.

When asked about the reports, an SNP source denied there was any backbench unrest. Sturgeon sat impassively beside Salmond during the unusually lively debate in parliament, with jeering from both sides. (Editing by Louise Ireland)

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