There is one clear message from today's thoughtful speech by Mark Carney the Governor of the Bank of England - that the failings of the Eurozone show that to have a successful monetary union you require fiscal and political union.
This is a detailed speech but make no mistake, the Governor's judgement on currency unions is devastating for Alex Salmond's currency plans. Why? Because the whole point of independence is to break the fiscal and political union that makes monetary union possible.
I know from my own experience that when you are Chancellor you would be foolish to ignore such a clear message from the Governor of your central bank. Already there was an overwhelming consensus amongst experts that the SNP currency position is not credible. Both the current Chancellor and Shadow Chancellor have said they don't think the plans to create a Eurozone-style Sterlingzone are in the best interests of Scotland or the continuing UK. I expect this speech will only serve to entrench that view.
The governor has spelled out in stark terms the problems of a currency union. Above all it needs people living in the rest of the UK to agree to something they have never been asked about.
As the Governor makes clear, in a currency union both sides have to agree to each other's taxes, spending and borrowing. This is what is happening in the Eurozone today. It is highly unlikely that the people living in the rest often UK would agree to this. And remember, in a currency union like this, Scotland has 10% of GDP and the rest of the UK would have 90%. It is clear who would call the shots.
The Governor also makes it clear you would need to have a banking union. This means that the rest of the UK would need to be willing to underwrite Scottish financial institutions. Would people living in England Wales and Northern Ireland agree to carry the risk of bailing out Scottish banks as they did with RBS? How much would Scottish banks have to pay for this guarantee?
The Governor ends his speech with a crucial point. "A durable, successful currency union," he says, "requires some ceding of national sovereignty." Fiscal union without political union is undemocratic and unsustainable. Just think of how small nations in the Eurozone have had cuts and tax rises forced on them by the bigger EU states. I suspect this is why most of the leadership of Yes Scotland are now opposed to keeping the pound if Scotland votes to leave the UK.
The Governor's speech quietly demolishes Alex Salmond's claim that Scotland could keep the UK pound after leaving the UK. The nationalists cannot continue to make false promises on currency when it is so obvious that leaving the UK means losing the UK pound. People realise that independence is too big a risk to take. The fact that Alex Salmond won't even tell us what money will be in our pocket or purse after leaving the UK is the most obvious example of that.
So, when the rest of the UK say no to a currency union, what money will we use? Alex Salmond cannot continue to dodge what is now the central question of the referendum campaign.
Leaving the UK and losing the strength and security of the UK Pound would have a profound impact on the lives of Scots:
- We would face higher cost of living with higher mortgage repayments, higher credit card and store card bills and more costly car loans because Scotland would have no credit rating.
- It would mean fewer jobs due to the cost of changing money every time Scottish firms buy or sell from our biggest customer - the rest of the United Kingdom.
- It means higher taxes as the Scottish Government pays more to borrow money meaning more debt.
- And it means bigger risks for our economy. The total bailout of RBS by UK taxpayers was twice the size of the entire Scottish economy. If I had been chancellor of an independent Scotland and did not have the back-up of the rest of the UK Scottish banks would have gone under and families would have lost everything.
The pound is one of the most trusted and secure currencies in the world. Why would we trade that for a deeply uncertain future with an unknown and unproven currency?
Alistair Darling is a Labour MP for Edinburgh South West, former Chancellor of the Exchequer and leader of the Better Together campaign. This blog first appeared on the Better Together site, and can can be viewed here