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BOE boss warns Scotland on independence

Wednesday, January 29, 2014 - 02:20

Jan 29 - Bank of England Governor Mark Carney says an independent Scotland that keeps the pound would have to give up some national sovereignty or risk the kind of problems exposed by the euro zone crisis. (Rough cut - no reporter narration)

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(SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "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 put in place. Those risks have been clearly demonstrated in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance. The euro area is now understandably, 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. In short, a durable, successful currency union requires some ceding of national sovereignty." (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "Seventy percent of Scottish exports are destined for and 75 percent, 74 percent of imports into Scotland come from the rest of the UK. However there is a word of caution here. There is a wide body of evidence that national borders can influence trade flows, even between otherwise highly integrated economies. The high degree of integration between Scotland and the rest of the UK may in part depend on their being part of the same sovereign nation." An independent Scotland that keeps the pound would have to give up some national sovereignty to avoid the kind of risks exposed by the euro zone crisis, Bank of England Governor Mark Carney said on Wednesday (January 29). Carney, speaking in detail for the first time on issues related to September's independence referendum, said he would not be drawn on whether Scots would be better off if they voted to break away from the rest of the United Kingdom. In a speech to Scottish business leaders, he stressed that any talks between breakaway Edinburgh and London and Scotland's desire to share the British pound, would have to proceed with great caution. He said there would have to be tight fiscal rules and a banking union to avoid risks seen in the eurozone. He listed the benefits and potential pitfalls for countries which share the same currency, including the "potentially large costs" of giving up an independent monetary policy and a flexible exchange rate. The Canadian noted the deep economic integration between Scotland and the rest of the United Kingdom, which buys 70 percent of Scottish exports. Carney, making his first visit to Scotland since taking over as BoE governor last year, had earlier met Scotland's First Minister Alex Salmond, a champion of Scottish independence. Salmond's Scottish National Party, which runs Scotland's devolved government, and defenders of the three-centuries-old union with England are locked in an increasingly bitter debate over the rewards and risks of independence. British finance minister George Osborne has said the rest of Britain might be unwilling to let an independent Scotland keep the pound. The SNP has responded by suggesting that Scotland might in return refuse to take on its share of Britain's 1.2 trillion pounds ($2.0 trillion) of government debt. With the independence campaign lagging in opinion polls, financial markets have so far shown little concern about the chance of Scotland leaving the UK, and taking a chunk of North Sea oil and gas with it. But a poll published on Sunday showed the pro-independence campaign starting to gain ground, with 37 percent in favour of independence, 44 percent against and 19 percent unsure, according to a survey by polling company ICM.

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BOE boss warns Scotland on independence

Wednesday, January 29, 2014 - 02:20